A  PRACTICAL  NATIONAL  MARKETED 

ORGANIZATION  AND   RURAL-CREDITS 

SYSTEM  FOR  THE  UNITED  STATES 


ADDENDA  TO  A  HEARING  BEFORE 

THE  STATE  DEPARTMENT 

JUNE  21,  1915 


\ 


¥  JAN  1 5  1938 

V? 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1915 


A   PRACTICAL   NATIONAL   MARKETING   ORGANIZATION   AND 
RURAL  CREDITS  SYSTEM  FOR  THE  UNITED  STATES. 


ADDENDA  TO  A  HEARING  BEFORE   THE  STATE  DEPARTMENT 

JUNE   21,    1915. 


[Presented  to  the  Secretary  of  State,  October  19,  1015,  by  Mr.  David  Lubin, 
delegate  of  the  United  States,  International  Institute  of  Agriculture,  Rome.] 


Mr.  David  Lubin  to  the  Secretary  of  State. 

NEW  YORK,  K  Y.,  October  19,  1915. 

SIR  :  On  June  21, 1915,  there  was  a  hearing  before  the  State  Depart- 
ment on  "a  practical  national  marketing  organization  and  rural 
credits  system  for  the  United  States." 

I  inclose  herewith  an  additional  statement  on  each  of  these  sub- 
jects, and  respectfully  request  that  they  be  received  as  an  addenda  to 
the  hearing  above  indicated. 

I  have,  etc.,  DAVID  LUBIN, 

Delegate  of  the  United  States, 
International  Institute  of  Agriculture. 

3 


I 


COOPERATIVE  RURAL  CREDITS  FOR  FARMERS 
BY  FARMERS. 

THE  LANDSCHAFT   SYSTEM. 

In  a  letter  to  Senator  Fletcher,  commenting  on  the  rural-credits 
situation,  Mr.  James  Anderson,  master  of  Portage  Grange,  Curtice, 
Mich.,  has  this  to  say  on  the  Landschaft  bonds : 

It  occurs  to  me  that  it  will  be  hard  to  sell  these  bonds  on  the  open  market 
for  the  reason  that  money  lenders  would  hesitate  to  buy  them  because  they 
would  not  draw  interest  enough  (3,  3^,  4  per  cent).  They  could  invest  their 
money  in  other  securities  that  would  bring  them  more  profit. 

As  a  rule,  a  statement  may  either  be  right  or  it  may  be  wrong, 
but  in  this  instance  Mr.  Anderson  seems  to  be  partly  right  and  partly 
wrong  at  the  same  time.  He  is  right  so  far  as  the  money  lenders,  the 
savings  banks,  are  concerned.  These  pay  their  depositors  3,  3-J,  or  4 
per  cent  and  make  their  profits  by  lending  these  deposits  out  at 
higher  rates,  largely  to  farmers  on  mortgages.  Such  money  lenders, 
savings  banks,  could  not  afford  to  buy  bonds  at  the  same  interest 
as  they  pay  their  depositors.  They  could,  therefore,  have  no  use  for 
the  Landschaft  bonds.  To  this  extent  Mr.  Anderson  is  right. 

But  if  Mr.  Anderson  intends  to  convey  the  idea  that  "it  will  be 
hard  to  sell  these  bonds  on  the  open  market,"  he  is  decidedly  wrong, 
as  will  be  seen  from  the  following.  If  the  security  behind  the  pro- 
posed Landschaft  bonds  would  render  them  as  safe  in  the  United 
States  as  they  are  in  Germany,  there  would  then  be  no  more  diffi- 
culty in  selling  them  here  on  the  open  market,  and  on  long  time, 
than  there  is  in  Germany. 

Let  us  see  if  this  can  be  made  plain.  Usually  when  "money 
lenders  "  are  spoken  of  we  are  under  the  impression  that  they  consist 
of  wealthy  capitalists  or  savings  banks.  But  there  is  another  kind 
of  money  lender  that  we  now  wish  to  bring  to  view ;  money  lenders 
who  are  so  modest  in  their  financial  bearing  that  we  hardly  realize 
that  they  are  money  lenders  at  all.  In  reality,  and  in  the  aggregate, 
however,  they  hold  a  primary  position  among  lenders,  for  they  are 
the  money  lenders  to  the  savings  banks. 

WHO  ARE  THE  REAL  MONEY  LENDERS? 

Who,  then,  are  these  money  lenders?  Well,  for  instance,  here  is 
Mr.  Johnson,  the  blacksmith;  he  has,  say,  $830;  over  there  is  Miss 
Brown,  the  servant  girl,  with  $150;  yonder  is  Miss  Jones,  the  school- 
teacher, she  has  $85;  then  comes  Mr.  Thompson,  the  carpenter,  lie 
has  $210;  and  then  we  have  Mrs.  Smith,  the  widow,  with  her  $1,500. 
What  are  these  people  to  do  with  their  money?  Are  they  to  leave 
it  home  in  the  trunk,  or  hide  it  in  a  stocking?  That  would  be  dan- 
gerous, for  it  might  be  stolen.  Are  they  to  invest  it  in  the  open 
market  ?  That  would  be  too  risky.  Thus  it  follows  that  the  logic  of 

5 


6  PRACTICAL   NATIONAL  MARKETING  ORGANIZATION. 

the  situation  drives  thorn  to  the  savings  banks,  and  compels  the 
acceptance  of  the  rate  of  interest  tendered  them.  These  people,  in 
depositing,  are  thus  lending  their  money  to  (lie  savings  hanks,  and 
are,  therefore,  money  lenders.  Now  a  few  of  thc-e  depositor,  may  be 
insignificant  factor.^  in  a  hank's  capital,  but  supposing  these  few  are 
multiplied  up  to  several  1 1-.. liquid -•'.  In  that  event  they  arc  no  longer 
insignificant;  they  have  become  important. 

Now,  then,  assuming  that  we  have  Lamlschaft.  bonds  of.  say.  $10, 
$20,  $50.  and  $100  denominations,  at  the  same  rate  of  interest  that 
the  hanks  pay;  that  these  bonds  are  as  safe  as  United  States  Govern- 
ment bonds;  that  we  give  the  people  the  choice  of  either  lending 
their  money  to  the  banks  or  investing  it  in  these  Landschaft  bonds; 
which  of  these  two,  then,  would  they  prefer?  Clearly  these  bonds. 
Why?  Because  savings  hanks  sometimes  fail,  but  a  bond  equal  to  a 
United  States  Government  bond  could  not  fail. 

Now,  then,  if  it  can  be  shown  that  a  long-time  Landschaft  bond 
can  be  made  as  safe  as  a  United  States  Government  bond,  it  would 
show  that  Mr.  Anderson  was  mistaken  when  he  said  "such  bonds 
would  not  sell  in  the  open  market." 

It  is  now  in  order  to  show  how  long-time  Landschaft  bonds  can  be 
made  as  safe  as  United  States  Government  bonds. 

This  is  indisputably  shown  by  the  fact  that  50  and  75  year  Land- 
schaft bonds  have  held  their  own  with  Government  bonds  in  Ger- 
many during  the  past  152  years,  and  are  holding  their  own  to-day. 
In  fact,  they  are  more  than  holding  their  own,  for,  according  to  the 
testimony  of  Prof.  Brodnitz,  of  the  Halle  University,  these  Land- 
schaft bonds  are  even  now  holding  their  own  in  Germany  in  the  face 
of  the  great  war  going  on. 

Why  is  this  the  case  ?    For  several  reasons : 

THE  BOND,  ITS  SECURITY. 

First.  Because  a  Landschaft  bond,  say,  for  $100  has  behind  it  the 
security  of  the  entire  Landschaft;  of  property  that  may  be  worth 
$5,000,000  or  more. 

Second.  The  title  of  the  borrower's  land  must  be  unquestioned,  as 
unquestioned  as  a  United  States  land  warrant  would  be. 

Third.  The  borrower,  in  signing  his  mortgage  and  receiving  the 
bond,  has  given  the  Landschaft  directory  the  power  of  a  judgment 
in  the  event  of  a  foreclosure. 

Fourth.  There  are  three  several  appraisements  in  which  the  qual- 
ity of  the  land,  its  character  and  incidence,  its  mode  of  cultivation, 
and  its  earning  power  are  minutely  entered  into. 

Fifth.  The  borrower  cedes  to  the  Landschaft  directory  the  right 
of  maintaining  the  same  status  of  its  cultivation  throughout  the  life 
of  the  bond. 

Sixth.  The  loan  by  the  Landschaft  is  always  made  upon  the  aver- 
age earning  power  of  the  land,  never  upon  its  speculative  value. 

Is  it  not.  therefore,  obviously  clear  that  a  bond  on  this  basis,  of 
that  kind,  would  be  as  safe  as  a  Government  bond  ? 

"*  Well,"  says  the  objector,  "  all  this  may  be  good  enough  in  Ger- 
many, but  it  could  never  be  expected  to  work  here." 

Why  not,  pray  ? 


PRACTICAL   NATIONAL  MARKETING   ORGANIZATION.  7 

"  Because  the  statements  from  one  to  six  show  that  it  would  be 
unconstitutional;  because  Farmer  Thompson  would  not  care  to  lump 
his  property  with  Farmers  Johnson,  Brown,  and  Smith  or  be  re- 
sponsible for  them;  because  it  would  be  contrary  to  our  legal  pro- 
cedure by  depriving  the  individual  of  his  rights  in  the  courts;  be- 
cause it  would  be  tyrannical  and  undemocratic,  consequently  opposed 
to  the  traditions  and  mode  of  procedure  of  the  American  people." 

But  are  these  objections  conclusive? 

By  no  means,  as  will  be  seen  when  we  take  up  the  statements 
seriatim.  So  let  us  begin  with  the  first  and  see  whether  "  Farmer 
Thompson  would  be  responsible  for  Farmers  Johnson,  Brown,  and 
Smith." 

How,  may  we  ask,  is  it  in  the  case  01  a  bond  of,  say,  the  Pennsyl- 
vania Kailroad  Co.  ?  Is  one  bond  issued  upon  the  security  of  one  of 
its  sheds,  another  upon  a  freight  car.  and  still  another  upon  a  fence? 
Are  not  its  bonds  upon  all  the  company's  property  ? 

We  must  not  forget  that  under  the  Landschaft  all  the  loans  are 
made  on  half  the  value  of  the  property,  and  this  value  is  arrived  at 
from  the  average  earning  power  of  the  same;  there  is,  therefore, 
margin  enough  in  each  member's  equity  to  cover  the  responsibility 
and  solvency  of  each  separately.  It  will  thus  be  seen  that  farmer 
Thompson  need  never  be  held  to  cover  any  deficiency  that  may  occur 
on  the  property  of  farmers  Johnson,  or  Brown,  or  Smith. 

BONDS  WITH  "  IPS." 

To  issue  long-time  bonds  on  each  piece  of  property  separately 
would,  of  course,  jeopardize  their  sales,  whether  singly  or  collectively. 
The  injury  would  be  caused  by  the  many  "ifs"  that  such  a  method 
would  bring  forth,  all  of  which  would  nullify  the  purpose  of  the 
Landschaft.  Such  issuance  would  render  these  bonds  speculative  in 
character,  therefore  of  no  determinate  value  or  stability  in  the  open 
market.  Such  bonds  could  by  no  means  be  classed  as  on  a  par  with 
Government  bonds.  .^ .' 

Now  for  the  second  statement,  the  question  of  title.  We  c,an  all 
understand  that  there  is  nothing  to-day  to  prevent  savings  banks  in 
any  State  from  lending  money  on  individual  farm  mortgages.  But 
how  would  the  matter  stand  if  such  savings  banks  were  to  issue  long- 
time bonds  on  these  mortgages  and,  under  the  prestige  of  United 
States  law,  under  the  quasi  sanction  of  the  Government,  sell  thou- 
sands of  these  bonds  of  one  State  to  people  living  in  the  various 
States  of  the  Union?  What  would  then  happen?  Who,  for  in- 
stance, would  do  the  adjudicating  in  any  questions  of  law  or  equity 
that  such  bonds  might  give  rise  to?  Who  would  adjudicate  between 
A  (the  farmer)  and  B  (the  savings  bank),  both  in  the  same  State, 
and  C  (the  bondholder)  in  any  of  the  other  States?  Where  and 
how  would  the  adjudicating  be  done? 

Say  a  bond  were  offered  on  the  mortgage  of  a  certain  farm  in  the 
State  of  Virginia,  would  the  prospective  buyer  of  the  bond,  for  in- 
stance, in  Oregon  or  Vermont,  have  no  "  ifs  "  present  themselves  to 
his  mind's  eye  in  relation  to  all  this,  and  in  relation  to  the  bond's 
value  and  stability?  There  surely  would  be  "ifs,"  pertinent,  ma- 
terial, and  relevant  ones,  too.  And  all  or  any  such  "  ifs "  would 
render  the  bond  of  speculative  value,  hence  far  removed  from  classi- 


8  PRACTICAL   NATIONAL  MARKETING  ORGANIZATION1. 

fication  as  on  a  pur  with  Government  bonds.  A  bond  uith  an  "if" 
in  the  open  market  ran  no  more  be  considered  as  on  a  par  with  a 
Government  bond  than  a  broken-down  donkey  can  be  classified  as  the 
peer  of  a  blooded  hoi 

A  TAIL  TO  Til  Kill   K  ITK. 

It  may  be  true  that  under  prestige  of  Government  sanction,  under 
quasi  Government  patronage,  such  bonds  would  at  first  find  numer- 
ous buyers.  But  the  more  numerous,  the  greater  the  ultimate  griev- 
ances that  would  be  likely  to  full  on  the  farmer  and  on  the  bond- 
holder. Such  bonds  would  quite  likely  be  as  mischievous  as  was 
the  paper  money  issued  by  State  banks  before  the  war. 

No  wonder,  therefore,  that  the  proposers  of  such  rural-credits 
measures  demand,  as  a  tail  to  their  kite,  that  the  Government  buy  or 
guarantee  such  bonds,  all  with  the  end  in  view  of  more  readily  liud- 
ing  the  way  to  open  the  purses  of  the  general  public.  But  there  is  no 
danger.  The  Government  is  too  rational,  too  wide  awake  to  be 
caught  in  any  such  trap. 

"But,"  says  the  objector,  "how  about  State  bonds,  municipal 
bonds,  or  county  road  bonds,  are  they  not  issued  in  one  State  and 
sold  in  other  States?" 

Yes.  But  there  is  a  vast  difference  between  the  titles  and  the 
validity  status  of  this  class  of  security  and  the  thousand  and  one 
questions  affecting  the  title  and  the  exigencies  which  go  to  make  up 
the  value  of  a  farm,  or  a  part  of  that  farm,  or  that  of  thousands  of 
other  farms. 

"But,"  continues  the  objector,  "if  we  were  to  take  up  the  Land- 
schaft  would  that  not  necessitate  either  a  constitutional  amendment 
or  the  adoption  of  a  uniform  title  law  in  every  State  in  the  Union  '.  " 

Not  necessarily.  The  United  States  may,  under  the  present  Con- 
stitution, have  the  right  to  pass  a  bill  authorizing  the  Landschaft 
under  national  charter,  and  under  regulation  and  direction  of  the 
Secretary  of  the  Treasury.  The  Secretary  of  the  Treasury  could 
then  submit  applications  for  such  charters  to  the  Attorney  General 
for  his  opinion  as  to  whether  the  applicants  could  carry  out  the  pro- 
visions under  the  law.  If  there  were  no  legal  obstacles  in  the  State 
laws  of  the  applicants,  if  the  provisions  as  set  forth  in  the  charter 
could  be  carried  out,  the  charter  would  be  granted.  If  such  ob- 
stacles did  exist,  however,  the  charter  would  be  refused;  refused 
until  the  State  had  altered  its  laws  so  as  to  permit  compliance  with 
the  national  law.  Any  State  desiring  the  Landschaft  would,  of 
course,  willingly  modify  its  laws  to  permit  it. 

In  substance,  since,  under  the  Landschaft,  there  is  to  be  permission 
give  to  cooperative  groups  of  farmers  in  one  State  to  issue  mortgages 
to  themselves  and  to  convert  these  mortgages  into  bonds  which  are 
to  be  sold  in  all  the  other  States,  and  since  these  bonds  are  to  be 
mainly  bought  by  working  people  and  by  widows  and  orphans,  and 
since  the  United  States  is  asked  to  pass  the  laws  permitting  all  this, 
and  since  the  United  States  is  to  act  as  the  umpire  between  the  or- 
ganization of  farmer  borrowers  on  the  one  hand  and  the  people 
lenders  on  the  other,  it  is  therefore  rendered  an  imperative  neces- 
sity that  the  United  States  be  given  the  legal  power  to  assume  the 
functions  of  this  umpireship. 


PRACTICAL  NATIONAL  MARKETING   ORGANIZATION.  9 

IN  TIME  OF  STRESS. 

And  now  for  the  third  statement,  where  the  farmer  "in  signing 
his  mortgage  and  receiving  the  bond  has  given  the  Landschaft  the 
power  of  a  judgment  in  the  event  of  a  foreclosure." 

This  seems  harsh  and  drastic.  But  is  it  ?  Let  us  see :  In  the  first 
place,  were  the  borrower,  under  the  charter,  allowed  any  recourse  to 
law,  that  recourse  would  operate  prejudicially  on  the  bond.  The 
bond  would  then  no  longer  be  without  any  "ifs;"  on  the  contrary,  it 
would  be  subject  to  many  "  ifs,"  and,  as  has  been  shown,  a  bond  with 
an  "  if  "  has  a  speculative  value,  hence  would  no  longer  be  as  secure 
as  a  Government  bond,  all  of  which,  of  course,  would  neutralize  the 
intent  of  the  Landschaft. 

But  let  us  see  whether  the  case  is  really  as  harsh  and  as  drastic 
as  it  seems  to  be.  In  the  case  of  the  Landschaft,  the  farmer  in  time 
of  stress  would  have  his  fellow  members  of  the  Landschaft  take  up 
his  case  and  act  upon  it.  While  they  could  not  vary  from  the  regu- 
lations as  laid  down  for  them  by  their  charter,  they  could,  of  course, 
personally  subscribe  to  aid  such  a  farmer  in  his  difficulty.  This  is 
almost  always  the  way  such  cases  are  handled  where  this  system  is 
operated  in  Germany.  It  is  only  in  very  rare  instances  that  fore- 
closures occur  under  a  Landschaft,  and  even  then  every  dollar 
realized  through  public  sale  of  the  foreclosed  property  above  the 
amount  of  the  mortgage  and  unpaid  interest  must  be  handed  over 
to  the  borrower.  But  the  same  man,  however,  in  the  hands  of  the 
money  lender,  even  with  all  the  recourse  to  law,  in  time  of  stress 
meets,  as  we  see,  with  but  scant  courtesy.  And,  as  a  rule,  there  is 
precious  little  left  for  anyone  after  the  property  has  passed  through 
the  storm  of  the  law  courts. 

It  will  thus  be  seen  that  instead  of  the  Landschaft  being  "harsh 
ynd  drastic,"  it  is  nothing  of  the  kind.  It  is  rather  the  present  system 
that  is  harsh  and  drastic. 

"  ITS  "  ARE  COSTLY  LUXURIES. 

Now  let  us  proceed  to  statements  fourth  and  fifth,  wherein  the 
borrower  is  to  give  testimony  as  to  facts  relating  to  his  land,  and 
where  he  cedes  to  the  Landschaft,  during  the  life  of  the  mortgage, 
the  right  of  maintaining  the  same  status  of  cultivation  as  that  main- 
tained previous  to  his  becoming  a  member  of  that  organization. 
These  two  statements  also  seem  "harsh  and  drastic."  It  will  be 
found  upon  analysis,  however,  that  they  are  no  more  so  than  was 
statement  three,  for  unless  this  power  were  ceded  to  the  Landschaft 
there  would  be  left  room  for  many  "  ifs "  in  the  bond,  and,  as  has 
been  said  before,  the  presence  of  an  "  if  "  would  neutralize  the  intent 
of  the  Landschaft. 

In  short,  as  everyone  knows,  there  is  no  necessity  for  anyone  to 
canvass  around  piling  up  heaps  of  arguments  to  show  why  a  $20 
Treasury  note  is  worth  $20.  No  one  needs  to  be  convinced  of  that 
fact,  not  even  the  illiterate  of  the  immigrant.  The  same  reasoning 
will  apply  to  a  bond.  If  it  is  a  Government  bond  there  is  no  necessity 
to  argue  the  case,  for  everyone  knows  its  value.  The  very  same  thing 
applies  to  a  land-mortgage  bond.  Whenever  the  people  would  have 


10  PRACTICAL  NATIONAL   MARKETING   ORGANIZATION. 

faith  that  a  gi\en  long-time  mortgage  bond  is  as  safe  as  a  Government 
iMdid.  tin-re  would  be  no  trouble  in  disposing  of  it  in  the  open  market 
as  readily  as  a  (Jovernment  bond.  The  Landschaft  would  thus  en- 
able the  Farmer  to  borrow  money  in  the  open  market  from  the  public 
nt  the  same  rate,  or  for  less  than  the  savings  banks  now  pay  to  their 
depositors.  Or,  in  other  words,  the  farmers  would  then  get  their 
money  on  long  time  at  3,  3-J,  or  4  per  cent. 

And  right  here  it  will  be  in  order  to  take  up  the  statement  of 
Congressman  Moss  in  his  address  before  the  Farmer*'  National 
Congress  at  Omaha.  Congressman  Moss  is  reported  as  saying: 

I  can  see  no  objection  to  giving  the  Landschaft  n  trial  by  nny  Stato  in  the 
United  States.  I  will  even  go  so  far  as  to  express  the  wish  that  this  may  l>e  done 
*  *  *.  It  is  perhaps  the  best  form  of  organization  of  mortgage  cn-dlt  under 
a  pure  cooperative  plan.  I  do  not  believe  that  it  can  be  authorized  as  ;>.  national 
institution.  I  do  not  understand  either  Mr.  Lubin  or  Mr.  Herrick  to  indorse  and 
recommend  it  in  that  sense. 

I  would  respectfully  suggest  to  Congressman  Moss  that  he  go  over 
my  statements  on  the  Landschaft  (which  I  believe  he  will  find  on 
file  at  the  State  Department  and  at  the  Department  of  Agriculture), 
and  he  will  see  that  I  not  alone  did  not  "  indorse  and  recommend  " 
this  system  as  a  "State"  institution,  but,  on  the  contrary,  that  I 
always  opposed  it  as  such.  I  opposed  it  because  it  could  not  be  made 
to  work  as  a  State  institution. 

UNQUESTIONED  SECURITY. 

Why  not?  Because  no  sensible  buyers  of  bonds  in,  say,  State  X 
would  care  to  invest  in  long-time  bonds  on  farm  mortgages  in,  say, 
State  B  under  the  limitations  of  State  B's  laws.  Such  bonds  would 
have  a  speculative  value  and  the  moment  they  became  speculative 
they  would  cease  to  bring  a  price  above  par,  at  par,  or  even  anywhere 
near  par.  Long-time  bonds  on  farm-loan  mortgages  with  fixed  low 
rates  of  interest  may  only  maintain  their  value  in  the  open  market 
whenever  their  security  is  unquestioned. 

But  is  not  farm  land  unquestioned  security  ? 

Under  present  conditions,  no,  by  no  means,  as  may  be  seen  from 
the  following:  First  of  all,  there  are  the  thousand  and  one  perplexing 
and  technical  questions  affecting  the  titles;  there  are  the  intricacies 
and  variations  of  the  State  laws  in  each  of  the  States — their  inter- 
pretations, decisions,  and  their  precedents.  Then  come  the  questions 
of  local  appraisement  and  questions  of  the  standing  of  the  appraisers, 
their  methods,  and  motives.  Last,  but  by  no  means  least  in  impor- 
tance, come  the  questions  of  the  probable  decisions  of 'the  courts  in, 
say,  State  B  between  the  proposed  farmer  borrowers  in  State  B  and 
the  bondholders  in  States  X,  Y.  or  Z. 

Furthermore,  Congressman  Moss  admits  that  the  Landschaft  is 
"the  best  form  of  organization  of  mortgage  credit  under  a  pure 
cooperative  plan."  I  think  that  the  facts  in  the  case  will  warrant  an 
amendment  to  this  statement.  In  fact,  not  merely  an  amendment, 
but  a  substitution,  as  follows :  "  The  Landschaft  is  the  only  form  of 
organization  of  mortgage  credit  under  a  pure  cooperative  plan." 
Before  proceeding  further,  I  deem  it  in  order  to  take  up  the  words 
"rural  credits."  What  do  these  words  mean?  They  simply  mean 
lending  and  borrowing  money  on  farm  mortgages,  and  since  there 


PRACTICAL  NATIONAL  MARKETING  ORGANIZATION.  11 

is  lending  and  borrowing  of  money  on  farm  mortgages  to-day  we, 
therefore,  have  rural  credits  at  the  present  time ;  in  fact,  have  had  it 
right  along.  We  thus  see  that  the  question  before  us  is  not  one  of 
merely  "  rural  credits  "  without  qualifications,  but  a  question  of  "  rural 
credits  "  with  qualifications. 

A  DECIDED  DIFFERENCE. 

Now,  at  the  present  time  we  have  rural  credits  as  follows:  Unor- 
ganized farmers  borrow  money  on  mortgages  from  organized  money 
lenders,  the  banks.  The  banks  obtain  the  money  from  the  people 
at  from  3  to  4  per  cent,  in  the  form  of  deposits,  and  lend  it  out 
to  the  farmers  at  the  highest  rate  of  interest  that  it  is  possible  to 
obtain  from  them.  That  is  the  present  system,  and  the  same  would 
be  the  case  with  any  and  all  of  the  ';  rural  credits  "  measures  for  banks 
that  have  so  far  been  introduced  in  Congress.  The  same  would  be 
the  case  whether  the  Government  purchased  bonds,  whether  the 
Government  guaranteed  the  bonds,  or,  in  short,  under  any  plan  so 
long  as  the  system  meant  "  the  bank."  That  the  interest  under  such 
banks  would  be  low  at  the  start  would  be  no  criterion  as  to  what  it 
would  be  as  time  went  along.  We  all  know  that  profit-earning  banks 
are  not  benevolent  institutions,  and  that  they  sometimes  learn  to 
collect  "  all  that  the  traffic  will  bear." 

But  how  would  the  case  be  if  we  were  to  have  the  Landschaft? 

There  would  then  be  a  decided  difference;  there  would  then  be 
unions  or  groups  of  farmers,  Landschaften.  These  farmer  groups, 
under  charter  of  the  national  laws  and  under  guidance  and  direction 
of  the  Secretary  of  the  Treasury,  would  accept  the  mortgages  on 
the  farms  of  their  own  members ;  its  board  of  directors  would  convert 
these  mortgages  into  Landschaft  bonds.  Its  bonds  would  then  be 
bought  by  the  people,  the  very  same  people  who  now  deposit  with 
the  money  lenders. 

These  Landschaft  bonds  would,  under  national  law,  under  guid- 
ance and  control  of  the  Secretary  of  the  Treasury,  afford  such  security 
that  the  people  who  now  deposit  their  money  in  savings  banks  at 
from  3  to  4  per  cent  would  be  very  willing  to  buy  these  bonds  at  the 
same  rate  of  interest.  The  farmers  would  thus,  as  groups  of  organ- 
ized borrowers,  be  rendered  independent  of  the  banks.  This  is  the 
story  and  the  whole  story. 

IT  IS  HIGH  TIME. 

It  is  high  time  for  the  farmers  of  this  country  to  master  this  story 
thoroughly,  as  talk  of  any  other  kind  of  cooperative  land-mortgage 
credit  is  sheer  nonsense.  The  cooperative  is  the  Landschaft,  so  far 
as  farm  mortgage  credit  is  concerned.  As  soon  as  the  American 
farmers  will  understand  this  they  will  know  what  to  ask  for  from 
Congress,  and  they  will  be  likely  to  get  what  they  ask  for.  If  they 
do  not  understand  it,  they  will  be  likely  to  reach  out  their  hands  for 
something  else,  something  that  they  really  do  not  want  and  some- 
thing that  they  should  not  have;  in  fact,  something  that  is  dangerous. 
Some  are  screaming  in  the  direction  of  anarchistic  and  socialistic  de- 
mands for  Government  money  and  Government  guarantee,  and-  on 
what?  On  lands  that  have  crazy  titles;  on  lands  that  the  keenest 


12  PRACTICAL  NATIONAL   MARKETING  ORGANIZATION. 

exports  in  the  country  are  required  to  determine  on  hair-sj 
points;  on  lands  that  can  he  inflated  in  artificial  value  ad  innnitum; 
on  lands  where  the  titles  are  so  various,  abstract,  abstruse;  on  lands 
that  support  a  larger  number  of  lawyers  on  questions  of  \\hal  the  law 
is  and  what  the  law  \>n'(.  perhaps  double  or  treble  in  strength  of 
numbers  to  all  of  our  standing  Army,  and  yet  the  Government  is  to 
hand  out  the  public  money  for  bonds  on  mortgages  on  this  legal  mess. 
And  in  all  this  cry  of  Government  purchase  of  bonds  or  guaranteeing 
of  the  same  was  there  an  equal  cry  for  the  unification  throughout  the 
United  States  of  the  laws  on  land  titles? 

Now  the  Landschaft  is  the  first  rational  step  in  that  direction,  for 
you  can't  have  a  Landschaft  on  muddley  titles;  the  titles  must  be 
made  clean  and  healthy,  as  they  are  in  Germany,  and  that  will  be  a 
irreat  step  toward  lightening  the  abominable  load  upon  the  shoulders 
of  American  agriculture,  as  frightfully  uncomfortable  and  uncanny 
to  pack  around  as  was  the  pack  on  Christian's  back  in  the  Pilgrims' 
Progress.  So  let  us  have  a  beginning,  let  us  have  the  Landschaft. 

But  in  Germany,  where  the  Landschaft  is  in  operation,  are  there 
not  also  mortgage  banks? 

Yes ;  both  are  there,  side  by  side,  as  it  were.  And  both  are  needed 
side  by  side.  Why?  Because  under  the  Landschaft  loans  may  only 
be  made  on  a  valuation  of  the  earning  power  of  the  land,  not  upon 
its  speculative  value.  Now  it  sometimes  happens  that  certain  lands, 
especially  those  near  growing  cities,  are  held  at  much  higher  rates 
than  their  earning  power.  Where  the  regulations  of  the  Land- 
schaft could  only  permit  the  acceptance  of  a  mortgage  of  say  $25 
an  acre  on  the  productive  value  of  the  land,  the  bank  may  be  willing 
to  lend  double  or  treble  or  more  per  acre  on  its  speculative  value. 
This  is  the  reason  why  there  is  room  for  banks  alongside  the  Land- 
schaft. 

AN  OVERFLOW. 

These  banks  in  Germany  serve,  as  it  were,  as  an  overflow  for  the 
business  which  the  Landschaft  will  not  take.  But  banks  of  this  kind 
should  not  be  permitted  to  convert  their  mortgages  into  bonds  to  be 
sold  on  the  open  market.  Such  bonds,  as  has  before  been  shown, 
would  be  dangerous  for  the  farmers  and  for  the  buyers  of  the  bonds. 
Such  banks  should  merely  do  their  money  lending  on  mortgages 
as  they  do  it  now  with  this  difference:  To-day  such  banks  have  no 
competitors,  but  with  the  Landschaft  in  operation  there  would  be 
effective  competition — the  Landschaft  would  be  the  competitor. 

From  all  the  foregoing  it  will  be  seen  that  there  is  but  one  practi- 
cable mode  of  cooperative  mortgage  credit,  and  that  mode  is  the 
Landschaft. 

Before  dismissing  the  subject,  however,  there  is  still  one  phase 
which  has  not  yet  been  discussed.  Assuming  that  the  questions  of 
title  under  the  Landschaft  would  be  set  right,  would  this  in  itself  be 
sufficient  to  convert  the  mortgage  into  a  gilt-edged  bond?  Where  is 
the  appraisement?  How  do  we  know  that  this  and  the  other  duties 
of  the  Landschaft  will  be  performed  properly?  The  answer  is  the 
following:  First  of  all.  there  should  be  followed  here  about  the  same 
routine  that  is  followed  in  Germany.  Secondly,  the  proposed  modi- 
fication, giving  the  national  supervision  to  the  Secretary  of  the 


PRACTICAL  NATIONAL  MARKETING   ORGANIZATION.  13 

Treasury,  with  a  national  commission  of,  say,  five  under  him.  with 
office  room  in  Washington,  in  which  will  be  depositories  for  the 
mortgages  of  the  various  Landschafts,  the  blank  bonds  to  be  partly 
filled  out  by  this  national  commission  and  sent  to  the  Landschafts  iri 
return  for  their  mortgages,  all  of  which  will  key  up  and  check  the 
routine. 

PUBLIC  HEARINGS. 

As  to  the  appraisementSj  after  the  regular  appraising  values  have 
been  gone  through  with  they  are  to  be  listed  and  copies  hung  up  in 
the  front  of  public  buildings,  the  courthouse,  post  office,  etc.,  with  a 
printed  notice  underneath  to  the  effect  that  public  hearings  on  the 
appraisements  will  be  held  at  the  county  courthouse  at  a  stated  time 
and  the  public  are  invited  to  attend.  At  these  hearings  it  can  be  ex- 
pected that  the  attorney  for  the  widows'  and  orphans'  funds,  the 
agents  of  the  life  insurance  companies,  and  others  would  give  in  their 
testimony,  giving  their  version  of  each  and  all  of  the  appraisements. 

A  report  of  this  hearing  is  to  be  sent  on  to  the  subtreasury  commis- 
sion, on  the  strength  of  which  they  would  give  the  Landschafts  their 
rating  or  standing,  the  same  as  is  done  by  Dun's  and. by  Bradstreet's 
Mercantile  Agencies.  A  rating  of  "A-A-1 "  would  probably  sell  the 
bonds  a  number  of  points  above  par;  if  the  rating  were  lower,  the 
bonds  would  probably  be  some  below  par;  if  still  lower,  they  prob- 
ably Avould  not  sell  at  all;  there  would  then  be  something  wrong 
somewhere,  either  with  the  Landschaft  or  the  testimony  of  the  wit- 
nesses at  the  hearing.  A  rehearing  would  probably  set  the  matter 
straight  for  all  concerned. 

The  farmers  of  America  have  now  an  opportunity  to  get  a  good, 
sound,  rational  rural-credits  system.  They  owe  it  as  a  duty  to  them- 
selves, a  duty  to  their  children,  and  a  duty  to  the  American  people  to 
consider  this  matter  seriously  and  thoroughly ;  to  act  as  intelligently 
toward  carrying  it  as  if  the  Landschaft  were  a  banker's  or  a  mer- 
chant's proposal  with  the  bankers  and  merchants  behind  it...  Let 
the  American  farmers  understand  that  they  are  now  on  trial. . 

With  the  President  in  favor  of  a  sound  rural-credit  system,  with 
the  three  national  political  parties  pledged  on  the  same  line,  there 
seems  nothing  in  the  way.  So  there  is  nothing  else  for  the  farmer 
to  do  but  to  "  right  about  face  "  and  go  to  work. 


THE  NATIONAL  MARKETING  ORGANIZATION 

WHO  SHALL  PIONEER  THE  WAT  ? 

Mr.  H.  Blodgett,  of  Clayton,  Wash.,  in  a  letter  to  Senator  Fletcher, 
says: 

Beyond  a  doubt  rural  credits  and  marketing  would  be  of  the  greatest  Interest 
to  the  farmer,  but  beyond  a  doubt  these  measures  would  be  killed  by  the 
"  powers  that  be  "  unless  you,  and  they  that  have  the  power,  "  get  busy." 

Mr.  Blodgett  is  right,  but  only  to  a  very  limited  extent — that  is, 
if  he  limits  the  "  getting  busy  "  to  Senator  Fletcher  and  to  his  col- 
leagues in  Congress.  Such  limitations  may  be  sufficient  in  countries 
ruled  by  autocratic  power,  countries  where  government  sways  and 
directs  the  people.  The  United  States,  however,  is  not  an  autocracy, 
it  is  a  democracy — a  country  where  the  people  tell  the  Government 
what  they  want  done. 

If,  for  instance,  monetary  legislation,  commercial  legislation,  or 
legislation  on  labor  are  wanted,  it  is  the  financiers,  the  merchants,  or 
the  workingmen  that  "  get  busy,"  and  if  there  is  to  be  legislation  on 
agriculture  it  is  the  farmers  who  will  have  to  "get  busy."  Such 
being  the  case,  Mr.  Blodgett  would  have  been  nearer  the  mark  had  he 
given  his  "  get  busy  "  advice  to  the  American  farmers  instead  of 
limiting  it  to  Senator  Fletcher  and  to  his  colleagues  in  Congress. 

And  now,  it  may  be  asked,  since  the  proposal  before  us  on  rural 
credits  and  on  marketing  are  adaptations  of  systems  in  operation  in 
Germany,  how  does  it  happen  that  the  German  farmers  in  pioneering 
the  way  were  so  much  brighter  than  the  American  farmers? 

The  fact  is,  that  the  German  farmers,  originally,  were  not  brighter 
than  the  American  farmers;  in  fact,  they  were  not  nearly  as  bright. 
It  is  only  now  when  they  are  operating  under  their  effective  economic 
systems  that  the  German  farmers  have  become  bright,  as  bright  as 
the  American  farmers,  and  very  much  brighter.  In  fact,  they  have 
become  the  brightest  farmers  in  all  the  world,  and  because  this  hap- 
pens to  be  the  case,  let  it  be  noted,  it  has  rendered  Germany  the 
strongest  among  the  great  powers  of  the  world. 

But  we  have  not  yet  been  told  how  the  potential  brightness  of  the 
German  farmers  became  materialized  into  actual  brightness.     Was 
it  then  the  German  farmers  who  invented  and  devised  these  effective 
economic  systems  and  obtained  their  legislative  enactment? 
14 


PRACTICAL   NATIONAL  MARKETING   ORGANIZATION.  15 

WHO  PIONEERED  THE  WAT? 

No,  it  was  not.  They  were  devised  and  given  legislative  enactment 
by  the  Government.  Why  by  the  Government?  Because  it  is  a 
well  known  fact  that  farmers,  as  a  result  of  their  environment,  are 
too  conservative  to  devise  systems  or  to  pioneer  the  way  for  the 
adoption  of  changes  in  mode  or  method.  The  farmers  the  world 
over  are  the  last  to  make  changes  in  their  style  of  garments,  their 
mode  of  speech,  or  their  opinions.  No,  the  German  farmers  devised 
no  such  systems,  nor  did  they  pioneer  the  way  for  their  adoption. 

They  were  devised  and  adopted  for  them  by  the  power  and  far- 
seeing  wisdom  of  their  autocratic  Government.  The  rulers  of  Ger- 
many foresaw  the  tendency  which  the  rising  tide  of  socialism  prom- 
ised to  lead  up  to;  the  socialism  which 'was  confined  mainly  to  the 
urban  population — to  its  cities;  the  socialism  that  threatened  the 
destruction  of  their  political  status  quo.  The  Government,  there- 
fore, sought  a  method  for  the  control  or  eradication  of  this  socialism, 
and  it  believed  that  that  method  could  be  found  in  the  strengthening 
of  its  conservative  element — its  farming  population. 

Under  the  belief  that  with  the  reinforcement  of  sufficient  strength 
the  conservative  farmers  would  prove  more  than  a  match  for  the 
control  of  the  socialist  radical  of  the  cities,  the  ruling  power  of 
Germany  devised  and  enacted  into  law  the  economic  systems  of  rural 
credits  and  marketing  now  operating  there.  Experience  has  since 
proven  that  the  rulers  of  Germany  were  in  the  right ;  for  notr  alone 
does  the  present  advantageous  economic  status  of  the  German  farmer, 
under  these  systems,  hold  in  check  the  socialism  and  radicalism  of  the 
German  cities,  but  it  has  also  so  strengthened  Germany  as  to  render 
her  almost  invulnerable  and  invincible. 

The  economic  and  political  advantages  of  the  German  systems  of 
rural  credits  and  marketing  are  so  evident  as  to  justify  the  prompt 
and  well-directed  efforts  of  the  American  farmers  for  their  realiza- 
tion. 

PARADOXICAL  ? 

But  is  there  not  a  break  in  the  logic  of  these  statements?  We  are 
told  that  these  systems  were  devised  and  put  into  operation  by  gov- 
ernments; that  farmers  are  too  conservative  to  devise  effective  eco- 
nomic systems  or  pioneer  them  in  these  stages  for  their  enactment. 
But  we  have  also  been  told  that  the  farmers  rather  than  the  legis- 
lators will  have  to  devise  them  and  pioneer  the  way,  "  get  busy  "  for 
their  adoption.  So,  then,  we  seem  to  travel  in  a  vicious  circle  of  con- 
traries. The  Government  can  act  but  should  not  or  will  not;  the 
farmers  can  not  but  should. 

The  designation  "vicious  circle  of  contraries"  holds  good  if  we 
are  to  judge  from  the  economic  history  of  nations.  It  is  these 


16  PRACTICAL    NATIONAL   MARKETING   ORGANIZATION. 

"contraries"  which  have  l>een,  and  doubtless  will  continue  to  be,  the 
melancholy  cause  of  the  disintegration  of  nations.  For,  be  it  ob- 
served, the  two  chief  forces  constituting  the  nation  are  the  progres- 
sive and  the  conservative  forces— tin-  first,  the  urbans,  the  city 
people;  the  j-eeoiul.  the  farmers,  the  people  of  the  country. 

Whenever  and  wherever  these  two  forces  in  a  nation  are  about 
equally  matched  in  political  power  and  where  this  power  is  equally 
exerted,  there  is  then  and  there  the  greatest  amount  of  national 
strength.  The  undue  strengthening  of  the  one  at  the  expense  of  the 
other  must  ultimately  weaken  both,  as  this  tends  to  weaken  the 
nation.  As  the  undue  transfer  of  political  power  is  mainly  effected 
by  the  persistent  operation  of  inequities  in  the  economic  status  be- 
tween the  city  and  the  country,  it  may  be  of  interest  to  ascertain  the 
cause  which  makes  for  inequity  between  the  two. 

What,  then,  is  this  cause? 

The  farmers  seem  to  think  that  the  cause  is  "  Wall  Street,"  and 
they  hope  some  way,  some  duy,  to  eliminate  the  inequity.  Just  how 
they  do  not  know,  but  in  the  absence  of  a  plan  they  seem  to  derive 
some  sort  of  satisfaction  from  denunciations  of  anything  and  every- 
thing'1 Wall  Street/' 

But  is  this  answer  the  answer  ? 

CHANGES  IN  ECONOMIC  METHODS. 

r>y  no  means.  Wall  Street  is  not  the  cause  at  all;  it  is  rather  one 
of  th$,effects.  It  seems  to  me  that  the  party  at  fault  is  the  farmer 
himself  in  his  inertia.  Not  alone  is  this  true  of  the  farmers  of  this 
country,  but  it  is  true  of  all  the  farmers  of  all  the  other  countries  and 
in  alii  the  ages.  Let  us  see  if  the  fault  is  not  to  be  traced  to  this — 
'  thatjfthe  farmers,  as  a  result  of  their  environment,  are  too  con- 
servatiye  to  devise  effective  economic  systems  or  pioneer  them  in  the 
stage&ior  their  enactment." 

'•  Well,"  says  the  farmer,  "  do  you  expect  me  to  sit  down  and  think 
out  systems?  Don't  you  think  I  have  something  else  to  do?" 

And  there  you  are !  That  is  just  about  what  the  farmers  every- 
where all  have  said  and  what  they  may  be  expected  to  say  for  per- 
haps centuries  to  come,  and  that  is  the  reason  why  nations  come,  live 
awhile,  and  then  die. 

It  is  high  time  for  such  farmers  to  look  about  them  and  see  what 
changes  in  economic  methods  have  taken  place  since  the  last  half  of 
the  nineteenth  century.  There  is  the  telephone  and  the  telegraph. 
In  the  sale  of  his  annual  10-billion-dollar  production  how  much  use 
does  the  farmer  make  of  them  in  comparison  with  other  merchants 
who  sell  an  equal  amount  of  goods? 

"What  are  you  talking  about!"  exclaims  the  farmer.  "Do  you 
take  me  for  a  merchant?" 


PEACTICAL   NATIONAL  MAEKETING   ORGANIZATION.  17 

Well,  if  you  are  not  sufficient  of  a  merchant  to  sell  your  production 
then  you  must  rest  satisfied  if  others  do  the  selling  for  you  and,  of 
course,  in  their  own  way. 

But  to  return  for  a  moment  to  the  telephone  and  telegraph,  to 
the  modern  inventions  for  the  transaction  of  business.  There  are 
the  stenographer,  the  typewriter,  the  card  index,  the  board  of  trade, 
the  chamber  of  commerce,  the  clearing  house,  the  mercantile  agency, 
and  the  thousand  and  one  other  devices  and  methods  for  the  economic 
transaction  of  modern  business.  Do  the  farmers  use  these  to  the 
extent  that  other  business  men  do?  But  above  all,  does  the  farmer 
realize  that  since  these  inventions  came  along  there  has  been  a  com- 
plete change  in  the  method  of  employing  capital  and  in  the  method 
of  employing  mental  energy?  Beforetime  business  was  transacted 
by  individuals  or  firms,  but  in  our  day  business  is  transacted  through 
corporations,  many  of  them  with  business  ramifications  as  wide  as 
this  country  and  some  of  them  to  a  wider  extent — some  world-wide. 

A  COMMERCIAL  CUL-DE-SAC. 

With  what  mechanism  does  the  farmer  commercially  speak,  com- 
mercially hear,  commercially  go,  and  commercially  see?  Only  with 
the  organs  of  his  own  body,  consequently  the  farmer  is,  as  it  were, 
a  commercial  cul-de-sac.  He  is  commercially  dumb,  commercially 
deaf,  commercially  lame,  and  commercially  blind. 

"  Well,"  says  the  farmer,  "  I  will  prefer  all  this  to  blindly  rushing 
into  some  wild  socialistic  scheme.  I  do  not  wish  to  give  up  my  inde- 
pendence by  lumping  my  property  into  some  rattletrap  cooperation 
or  corporation." 

The  farmer  that  would  make  such  a  statement  would  clearly  be 
uninformed,  for  neither  under  the  Landschaft  method  of  rural  credits 
or  under  the  Landwirtschaftsrat  system  of  marketing  would  it  be 
necessary  for  him  to  give  up  one  iota  of  his  independence  or  to  "  lump 
his  property  into  some  rattletrap  cooperation  or  corporation."  nor 
can  either  of  the  two  proposals  be  classed  as  "  wild  socialistic  schemes." 
Under  the  Landschaft  rural-credit  systems  he  gives,  say,  $20,000 
worth  of  property,  properly  appraised,  for  a  $10,000  bond,  and  so 
do  all  his  neighbors.  While  the  bond  of  a  Landschaft  is  not  given 
on  any  special  piece  of  property  of  that  Landschaft,  each  bond  issued 
may  only  be  upon  the  limit  of  the  mortgage  as  permitted  by  the 
Landschaft.  It  therefore  follows  that  each  farmer  under  the  Land- 
schaft law  is  in  reality  only  responsible  for  his  own  indebtedness. 
This  has  proven  to  be  the  case  in  Germany,  where  the  Landschaft 
has  been  in  operation  during  the  past  152  years.  As  for  the  market- 
ing or  distributing  system,  that  is  in  nowise  a  corporation.  It  is 
simply  an  organized  semiofficial  nation-wide  bureau,  which  embraces 
12672°— 15 2 


18  PRACTICAL   NATIONAL    MAKK!   I  INC    OKliA  XI/ATION. 

the-  services  for  agriculture  (hat  commerce  receives  through  its  boards 
of  trade,  chambers  of  commerce.  clearing  houses,  etc. 

In  other  words,  •where  (lie  farmer  now  sees  with  his  own  two  eyes, 
he  will  have  added  to  his  commercial  vision  (he  commercial  sight 
of  millions  of  his  eoworkers.  If  we  were  to  strip  merchants  and 
financial  men  of  this  kind  of  knowledge,  we  would  make  commerce 
and  finance  as  incoherent,  as  disjointed,  as  illogical,  and  as  uncertain 
as  is  the  commerce  of  agriculture  to-day  in  the  hands  of  the  American 
farmers.  The  business  and  commercial  world  would  not  tolerate 
for  a  moment  the  abrogation  of  their  sources  of  wide  range  com- 
mercial knowledge  and  its  resultant  activities,  and  it  can  be  safely 
said  that  once  adopted  neither  would  the  American  farmer  abrogate 
it.  And  the  first  step  toward  the  materialization  of  the  proposals 
before  us  is  the  awakening  of  the  American  farmers  from  their  dor- 
mancy. They  must  rise,  gather  themselves  together,  put  on  the  har- 
ness, and  exert  their  power  by  pulling  the  car  of  progress  forward — 
whether  uphill  or  downhill — ever  forward.  If  they  pull  hard  enough, 
and  each  one  does  his  share,  they  are  sure  to  reach  the  goal. 

"Must"!    Why  "must"? 

ARISTOCRACY  ?     DEMOCRACY  ? 

Because  unless  the  farmers  change  their  economic  conditions  by 
means  of  sound  and  sensible  methods  they  must  expect  others  to  step 
in  and  manage  their  affairs  for  them.  This  after  a  fashion  is  being 
done  now  and  has  been  done  right  along.  And  as  it  continues  it  is 
quite  likely  to  develop  and  accentuate  present  grievances.  But  in 
what  must  it  all  end?  It  must  end  in  converting  this  American 
democracy  into  a  full-fledged  autocracy  as  surely  as  the  present  de- 
mocratized power  of  Germany's  farmers  must  in  the  end  convert  the 
German  autocracy  into  a  full-fledged  democracy. 

"  Eternal  vigilance  is  the  price  of  liberty."  And,  pray,  what  does 
that  mean?  Does  "vigilance"  mean  that  the  citizen  is  to  be  on  the 
constant  lookout  for  foreign  dreadnaughts  and  submarines?  No; 
that  is  the  function  of  the  Secretary  of  the  Navy.  Does  liberty 
mean  the  right  to  shout  "  Scoundrel "  or  "  Villain"  at  any  and  all  in 
public  life  ?  No ;  that  is  license.  Liberty  means  freedom — free  equi- 
table action  and  free  equitable  reaction  within  the  body  politic,  espe- 
cially so  in  the  economic  life  of  the  people. 

What  now  may  be  said  of  the  "  vigilance  "  of  the  farmers  ?  How 
is  it  made  manifest  in  the  field  of  economics?  Shall  it  merely  be 
limited  to  shouting  "  Wall  Street  "?  Shall  it  not  rather  be  in  effective 
economic  work?  It  certainly  should,  but  hardly  on  the  lines  limited 
by  Mr.  Blodgett's  suggestion. 


PRACTICAL   NATIONAL  MARKETING  ORGANIZATION.  19 

Each  farmer — not  Mr.  Blodgett  alone — should  make  it  his  business 
to  start  the  ball  rolling  by  sending  on  petitions  and  letters  to  Mem- 
bers of  both  Houses  of  Congress,  and  there  should  be  thousands  upon 
thousands  of  such  petitions  and  letters  from  every  section  of  the 
United  States  demanding,  first,  the  passage  of  House  joint  resolu- 
tion No.  344  for  the  national  marketing  organization,  and,  second,  the 
adoption  of  the  Landschaft  system  of  rural  credits. 

Sending  on  petitions  and  letters  to  Congress,  however,  is  only  a 
beginning.  The  farmers,  though,  of  course,  perennially  busy,  need 
not  expect  "  Wall  Street "  to  do  this  work  for  them.  They  must  do 
it  themselves.  It  is  true  that  in  Germany  this  work  was  done  for  the 
farmer  by  his  autocratic  Government.  But  in  this  country,  in  this 
democracy,  the  American  farmers  will  have  to  take  the  leading  stand 
themselves  if  this  work  is  to  be  done  at  all.  And,  be  it  understood, 
the  duty  to  proceed  should  not  merely  be  prompted  by  the  desire 
for  economic  betterment,  but  also  by  the  higher  one  of  political 
betterment. 

THE  BALANCE  OF  POWER. 

Political  betterment?     How  so? 

Because,  as  has  been  shown,  the  perpetuity  of  this  Nation,  the  per- 
petuity of  aii}r  nation,  is  dependent  upon  the  balance  of  power  be- 
tween the  two  integrant  elements  composing  it — the  progressive 
element  of  its  cities  on  the  one  hand  and  its  conservative  element  of 
the  country  on  the  other.  Hence,  it  is  clear  that  if  the  Nation  is  to 
persist,  is  to  prosper,  there  must  be  a  conservation  of  the  Nation's 
conservative,  the  farmer.  The  farmer  must,  once  for  all,  take  his 
place  in  the  Nation  as  a  commercial  entity  and  rank  as  a  commercial 
peer  alongside  the  business  man  of  the  commercial  cities.  This,  and 
this  alone,  will  bring  about  that  economic  equilibrium  so  essential  to 
the  life  of  a  progressive  nation. 

This,  and  this  alone,  will  make  the  American  people  the  great  and 
mighty  Nation  that  the  founders  of  this  Republic  intended  it  to  be, 
the  great  and  mighty  Nation  whose  mission  it  should  be  to  give  politi- 
cal light  and  political  healing  to  all  the  world.  This  is  the  mission 
that  is  to  give  political  utterance  to  the  politically  dumb;  to  give 
political  hearing  to  the  politically  deaf;  to  remove  the  political 
crutches  from  the  politically  lame;  and  to  give  political  sight  to  the 
politically  blind — this  the  world  over  and  for  all  time. 

And  this  mission,  the  mission  of  the  American  Republic,  may  by 
no  means  be  designated  as  purely  secular ;  it  is  in  reality  sacred.  It 
should  be  part  of  the  religion  of  every  American  farmer., of  every 
American  citizen.  It  stands  for  the  constant  striving  for  nation-wide 
equity  in  exchange,  equity  that  shall  make  for  national  and  individ- 
ual righteousness  between  man  and  man, -the  righteousness  that  in- 


20  rilACTICAI.    XAIIONAI.    M  A  I;  K  I.  I  I  N  <  ,    <>!'.(  \.\  MXATION. 


spired  the  utterances  of  those  great  tribunes  of  the  people,  the 
|>r<>l>lu-ts  of  old.  And  is  it  not  vividly  indi<-;'tcd  in  the  revered  \\onU. 
"  Thy  will  he  done  in  earth  us  it  is  in  heaven"? 

Once  let   the  American   fanner  start   out  on  this  work  in  earnest. 
and  it  can  be  safely  predicted  that  he  will  presently  have  eoworl. 
not  merely  his  fellow  fanners,  but  from  among  the  potent  forces  of 
the  cities. 

His  eil'orts  will  likely  be  supplemented  by  those  of  the  great  rail- 
road corporations,  who  are  beginning  to  see  that  railroad  values 
may  only  be  promoted  and  stabilized  to  the  extent  of  the  earning 
power  on  each  side  of  their  railway  tracks. 

It  can  be  expected  that  he  would  be  seconded  by  the  great  capi- 
talists, whose  chief  desire  it  is  that  their  securities,  bonds,  and 
properties  be  stabilized  at  the  higher  value. 

He  will  undoubtedly  be  aided  by  the  workingmen,  who  will  see  in 
the  prosperity  of  agriculture  a  guarantee  for  higher  wages  and 
shorter  hours,  and  an  increase  in  the  purchasing  power  of  every 
dollar  he  may  earn. 

He  will  be  sure  to  be  aided  by  the  growing  political  power  and 
influence  of  the  women  of  this  country,  who  will  not  be  slow  to  see 
that  the  prosperity  of  the  farmers  of  the  nation  means  the  prosperity 
of  the  family. 

It  may  safely  be  predicted  that  he  will  be  aided  in  this  effort  by 
all  right-minded,  patriotic  citizens,  and  that  even  "Wall  Street" 
may  find  it  to  its  interest  to  come  to  his  aid. 

So  then,  there  is  nothing  else  for  the  American  farmer  to  do  but 
take  off  his  coat,  roll  up  his  sleeves,  and  go  to  work,  and  continue 
working  until  he  becomes  the  commercial  peer  of  the  commercial 
cities  of  this  great  nation. 

o 


A  PRACTICAL  NATIONAL 

MARKETING  ORGANIZATION  AND  RURAL 

CREDITS  SYSTEM  FOR  THE 

UNITED  STATES 


A  HEARING  BEFORE  THE  STATE  DEPARTMENT 
JUNE  21,  1915 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1915 


A   PRACTICAL   NATIONAL   MARKETING   ORGANIZATION   AND 
RURAL  CREDITS  SYSTEM  FOR  THE  UNITED  STATES. 


A  HEARING  BEFORE  THE  STATE  DEPARTMENT  JUNE  21,  1015. 


PRESENT  AT  THE  HEARING:  MR.  SYDNEY  Y.  SMITH,  CHIEF  OF  THE 
DIPLOMATIC  BUREAU  OF  THE  STATE  DEPARTMENT;  MR.  DAVID 
LUBIN,  DELEGATE  OF  THE  UNITED  STATES,  INTERNATIONAL  INSTI- 
TUTE OF  AGRICULTURE,  ROME. 


THE    HEARING. 


Mr.  SMITH.  As  I  understand  it,  you  are  to  make  a  statement  on  a 
proposal  for  a  national  marketing  organization,  also  for  a  rural  credits 
system,  for  adaptation  and  adoption  in  the  United  States. 

I  would  like  to  ask  you  whether  the  subjects  you  will  speak  about 
this  morning  are  not  covered  in  the  report  made  oy  the  national  com- 
mission and  State  commissions  sent  to  Europe  in  1912,  to  inquire 
into  the  European  rural  credits  systems  ? 

Mr.  LUBIN.  They  are  and  they  are  not.  The  report  of  the  Ameri- 
can commission  (S.  Doc.  No.  214)  consists  of  some  916  pages.  It  con- 
tains perhaps  the  most  valuable  information  on  rural  credits  in  print 
anywhere.  The  presentation,  however,  is  not  in  the  form  where  it 
can  be  availed  of  off-hand,  for  there  are  all  shades  and  phases  of  rural 
credit  information  in  it  with  statements,  questions,  answers,  and 
opinions,  all  in  part  relevant  and  part  irrelevant  mixture.  A  para- 
graph or  two  may  be  relevant  and  a  paragraph  or  two  following  may 
not  be.  It  requires  a  guide  competent  to  pick  out  the  relevant  from 
the  irrelevant.  It  is  much  the  same  in  get-up  as  the  Congressional 
Record.  The  report  needs  competent  editing  and  all  irrelevant 
material  eliminated.  It  will  then  oe  in  available  form  for  all  to  use. 

Mr.  SMITH.  Mr.  Lubin,  please  proceed  with  your  presentation. 

Mr.  LUBIN.  The  presentation  is  to  be  divided  into  two  divisions; 
the  first,  the  Landwirtschaftsrat,  the  system  of  Germany,  her  national 
marketing  organization,  and  its  adaptation  and  adoption  in  the 
United  States;  and,  second,  the  Landschaft  rural  credits  system  of 
Germany  and  its  adaptation  and  adoption  in  the  United  States. 

I  will  begin  my  presentation  with  the  first.  The  Landwirtschaftsrat 
of  Germany  begins  with  the  township  organization.  Every  farmer 
who  owns  land  has  a  portion  of  his  tax  assessment  set  aside  for  the 
support  of  the  Landwirtschafsrat.  This  gives  him  the  right  to  vote 
for  a  chamber  of  agriculture  in  his  township.  The  township  organi- 
zation elects  its  representative  to  the  county  organization.  The 
county  organization  elects  the  members  to  the  State  organization, 
and  the  members  of  the  24  State  organizations  of  the  German 
Empire  elect  then*  National  Landwirtschaftsrat,  consisting  of  72 

2 

99122°— 15 


PRACTICAL   NATIONAL   MARKETING   ORGANIZATION.  3 

members.  Thus  we  have  an  organization  something  on  the  order  of 
a  pyramid,  the  broad  base  is  composed  of  the  township  organizations, 
the  layer  above  forms  the  county  organizations,  and  the  smaller 
layer  above  that  composes  the  State  organizations,  and  all  these  are 
capped  by  the  apex,  the  Natonal  Landwirtschaftsrat. 

To  begin  with,  the  72  members  of  the  Landwirtschaftsrat  have 
their  seat  in  Berlin.  They,  in  substance,  have  the  right  of  initiative 
and  referendum  touching  all  laws  that  directly  or  indirectly  concern 
agriculture.  The  imperial  laws  of  Germany  direct  that  the  Reichs- 
tag must  submit  these  laws  to  the  Landwirtschaftsrat  for  its  opinion. 

But  this  is  by  no  means  all  or  the  most  important  of  its  functions. 
The  township,  county,  State,  and  national  organization  is,  hi  sub- 
stance, a  semiofficial  information  bureau  for  the  purpose  of  the 
scientific  marketing  of  agricultural  products. 

The  membership  of  this  organization  consists  of  several  million 
units.  Its  semiofficial  status  gives  it  the  power  to  swing  the  dis- 
tributive end  of  German  agriculture,  and  thus  renders  trusts  in 
food  products  in  Germany  an  absolute  impossibility.  This  is  an 
invaluable  service  not  merely  to  the  farmers  but  likewise  to  the 
consumers  of  Germany  as  well. 

In  my  opinion,  this,  system  is  the  corner  stone,  the  secret,  the 
the  reason  of  the  strength,  the  transcendent  strength,  of  the  German 
Empire. 

Let  us  not  be  mistaken;  the  great  strength  of  the  German  Empire 
does  not  come  from  the  "goose  step"  of  her  soldiers  nor  from  her 
Krupp  guns ;  it  comes  as  a  direct  and  indirect  result  of  her  Landwirt- 
schaftsrat system  for  the  scientific  distribution  of  her  agricultural 
products,  of  the  food  products  of  Germany,  all  of  which  is  reinforced 
by  her  effective  and  efficient  rural-credits  system. 

I  have  observed  all  this  going  on  during  the  past  ten  and  a  half 
years  that  I  have  been  the  American  delegate  at  Rome  at  the  Inter- 
national Institute  of  Agriculture.  The  scope  and  labors  of  the 
German  Landwirtschaftsrat  have  also  been  set  forth  from  time  to 
time  in  the  monthly  publications  of  the  International  Institute. 

I  have  on  many  occasions  urged  in  my  reports  to  the  Secretary  of 
State  and  in  my  communications  to  the  Department  of  Agriculture 
and  to  the  former  Department  of  Commerce  and  Labor  the  needs  and 
desirability  of  having  due  consideration  given  to  the  Landwirtschafts- 
rat system  of  Germany.  This  with  a  view  of  its  adaptation  and  adop- 
tion m  the  United  States,  to  the  end  that  this  would  meet  the  economic 
needs  of  the  American  people,  especially  so  of  the  American  farmer. 

The  economic  advantage  of  this  system  is  so  manifest  that  it  does 
not  require  any  great  depth  of  mind  to  find  out  its  utility,  its  adapta- 
bility as  a  means  toward  economic  ends.  Nor  is  it  merely  economic 
benefits  which  result  from  it;  it  is  even  more  important  as  a  political 
factor,  a  factor  for  strengthening  the  political  life  of  the  Nation. 

And  on  this  head  let  me  say  that  President  Wilson  in  his  book,  The 
New  Freedom,  indicates  the  ideal  political  status  by  a  figure.  He 
points  to  the  overhead  and  underneath  shafting  of  a  factory,  to  the 
pulleys,  to  the  belting,  to  the  journals,  and  to  the  bearings.  If  the 
shafts  be  sprung  or  the  bearings  too  tight  or  too  loose,  or  the  pulleys 
out  of  line,  or  the  belts  awry,  there  is  trouble,  confusion,  and  loss. 
But  if  all  these  be  true  and  taut  and  in  alignment  all  is  well  with  the 
factory;  and  he  points  out  that  if  the  State,  like  the  factory,  adapts 


4  PRACTICAL  NATIONAL  MARKETING   ORGANIZATION. 

the  proper  means  toward  its  highest  ultimate  ends  and  conforms 
itself  thereto  its  progress  must  tend  toward  the  higher  ideal. 

There  is  yet  another  figure  that  may  be  introduced  to  help  bring 
out  what  is  intended.  Let  us  imagine  a  tug  of  war  between  A  and 
B.  On  the  side  of  A  there  are  10  men  at  the  rope,  and  on  the  side 
of  B  there  are  10.  If  A  offers  50  per  cent  resistance  and  B  offers 
50  per  cent  resistance,  the  tug  is  equal,  but  if  A  puts  forth  20  per 
cent  resistance  and  B  puts  forth  80  per  cent  resistance  the  tug  must 
soon  end  with  A  defeated. 

And  now  let  us  apply  that  figure  in  the  political  life  of  a  nation. 
Let  us  say  that  the  nation  consists  of  A,  tne  city  man,  the  urban, 
and  B,  the  countryman,  the  farmer.  A,  as  a  rule,  is  the  progressive, 
the  radical;  B,  the  nonradical,  the  conservative.  When  these  two 
forces  are  about  equal  in  action  and  reaction  we  have  stability, 
political  strength.  But  whenever  A,  the  radical,  has  his  own  way 
is  not  sufficiently  restrained  by  the  conservative  B,  the  political 
pulse  is  so  rapid  as  to  produce  political  fever,  national  illness,  and 
ultimately  national  death.  When,  on  the  other  hand,  B,  the  con- 
servative farmer,  is  sole  director,  sole  governor,  then  there  is  stagna- 
tion and  decay  and  ultimate  national  death. 

This  was  clearly  perceived  in  the  early  history  of  the  American 
Republic  by  one  of  America's  greatest  statesmen,  Alexander  Hamil- 
ton. He  pointed  out  that  we  nad  a  vast  domain  and  a  still  vaster 
prospective  domain  to  the  west.  There  was  the  almost  unlimited 
possibility  of  the  upspringing  of  a  vast  agricultural  population,  but 
this  was  not  to  his  liking.  A  purely  agricultural  population  would 
have  made  a  stagnant  country.  The  Republic,  to  live,  persist, 
and  develop,  required  an  additional  factor,  an  additional  power. 
It  required  a  radical  or  progressive  power  to  equal  the  nonradical 
or  conservative  power.  And  this  radical  and  progressive  power 
has  its  life  in  cities,  a  power  which  requires  manufactories  for  its 
upspringing,  and  where  was  that  power  to  come  from  since  we  had 
at  that  time  no  skilled  labor  and  no  means  of  educating  such  labor  ? 

It  was  then  that  Mr.  Hamilton  advocated  protection  by  a  tariff 
on  imports  of  manufactures,  a  tariff  the  cost  of  which  would  fall  upon 
agriculture  and  serve  as  a  bounty  to  the  manufacturer  and  his  pro- 
tected labor.  This  protective  system  he  desired  toput  into  operation 
in  order  to  build  up  the  "infant  industries."  We  have  long  since 
changed  that  cry  into  "protection  for  American  labor,"  but  that  is 
another  matter. 

Now,  to  return  to  the  needs  for  the  adaptation  of  the  Landwirt- 
schaftsrat  system  in  the  United  "States.  On  the  one  hand  we  hear 
that  the  economic  system  of  the  American  farmer  is  injuriously 
affected  through  defective  marketing  of  his  products.  On  the  other 
hand  we  hear  that  there  is  perhaps  no  time  in  the  history  of  this 
country  when  the  American  farmer  was  better  off,  when  he  had  more 
money  in  the  bank — and  then  look  at  his  automobiles,  and  his  wife 
all  dressed  up  in  city  clothes  and  Paris  hats  which  she  never  had 
before.  As  for  the  country  as  a  whole,  why  look  at  our  cities  with 
their  miles  and  miles  of  skyscrapers  and  palaces,  the  wonder  of  the 
world;  and  when  we  behold  all  these  things  there  should  seem  to  be 
no  hurry  to  catch  up  some  foreign  system  with  an  unpronounceable 
name  and  try  to  force  it  upon  the  American  people. 


PRACTICAL    NATIONAL   MARKETING   ORGANIZATION.  5 

There  is  a  strange  similarity  between  these  arguments  of  to-day 
and  those  used  in  old  Home  in  the  time  of  Tiberius  Gracchus,  in  the 
days  of  the  Roman  Republic,  when  Tiberius  cried,  "Rome  is  dying." 
"Restore  the  landowning  farmer  or  the  Republic  will  perish."  And 
what  was  the  response?  The  Romans  showed  him  miles  and  miles 
of  streets  with  marble  palaces.  Pointing  to  them  they  said:  "See, 
before  time  these  buildings  were  of  adobe,  of  clay  and  brick,  now  they 
are  marble  palaces;  how  is  Rome  dying?"  And  yet  he  insisted  that 
Rome  was  dying  and  clamored  for  the  Freeing  from  destruction  of  the 
farmers,  the  freeing  of  the  conservative  portion  of  the  Roman 
Republic.  He  predicted  that  the  vast  number  of  foreclosures  of  the 
landowning  farmers  of  Rome  would  soon  convert  the  free  conserva- 
tives of  the  Republic  into  destructive  radicals.  And  what  he  pre- 
dicted came  to  pass. 

After  Rome  had  conquered  Carthage,  Egypt,  and  Syria  the  con- 
quering lords  brought  the  cheap  corn  of  those  countries  into  Italy. 
This  forced  the  Roman  farmer  into  debt,  to  borrow  money  of  these 
lords.  As  a  result  of  all  this  the  Roman  farmer  was  eventually 
driven  from  his  land.  And  what  happened  ?  This,  Rome  perished 
and  crumbled  to  dust  and  ruin,  and  we  of  the  twentieth  century  go 
to  Rome  to  see  these  ruins. 

And  so  will  it  be  in  the  case  of  the  American  Republic  if  we  stolidly 
permit  the  operation  of  a  system  which  must  cause  the  conservative, 
the  landowning  farmer  of  the  Nation,  to  be  replaced  by  the  renter. 

Let  us  now  return  to  the  alleged  prosperity  of  the  American  farmer. 
While  there  should  not  at  this  time  in  American  history  have  been 
more  than  a  trifling  percentage  of  American  farming  lands  in  the 
hands  of  renters,  what  do  we  find  ?  We  find  from  the  census  report 
that  37  per  cent  of  the  agricultural  land  in  the  United  States  is  now 
in  the  hands  of  renters;  16  per  cent  of  these  renters  sprung  up  during 
the  last  10  years  of  the  census.  The  census  was  taken  up  to  1910. 
This  is  now  1915,  and  with  the  same  ratio  of  increase  it  will  be  very 
nearly  up  to  50  per  cent.  And  what  of  the  next  census  and  the  one 
after  that  ?  Shall  it  rise  to  60  per  cent,  to  70  per  cent,  and  so  on  ? 
If  so,  the  American  Republic  is  surely  groping  its  way  toward  the 
downward  incline  of  old  Rome. 

Let  us  not  deceive  ourselves.  There  is  a  force  at  work,  a  destruc- 
tive force.  It  works  silently  and  incessantly.  It  is  a  toll-gathering 
force,  a  scientific  toll-gathering  force.  Its  ingathering  tentacles  are 
not  merely  the  traditional  8  of  the  octopus,  but  these  multiplied  from 
8  to  80,  and  from  80  to  800,  and  from  800  to  8,000.  In  time  this 
destructive  force  will  sap  the  political  strength  of  the  Nation  and 
leave  it  a  wreck.  Some  of  the  onlookers  try  to  frighten  these  giants, 
these  octopuses,  these  trusts,  away.  Some  pelt  them  with  rhetorical 
bombast,  some  swear  at  them,  some  threaten  them  at  law,  and  some 
shout  at  them  from  the  housetops,  but,  of  course,  all  this  is  nonsense. 
Wlio  would  not  be  a  trust  man  if  he  could,  say,  make  a  million,  two 
millions,  ten  millions,  twenty  millions,  or  more,  or,  in  fact,  for  very 
much  less  ?  Let  us  have  some  horse  sense  in  this  matter  as  well  as  in 
other  matters;  it  is  not  the  trust  man  that  is  the  evil,  but  the  foolish, 
wicked,  and  criminal  conditions  which  permit  practices  that  make 
the  trust  possible.  They  have  done  away  with  that  sort  of  thing  in 
Germany,  and  why  should  we  not  do  away  with  it  here  in  the  United 
States  ?  We  can  do  away  with  it  if  we  want  to.  We  can  do  away 


6  PRACTICAL  NATIONAL  MABKETINO   ORGANIZATION. 

with  it  by  adapting  and  adopting  the  Landwirtschafterat  system  in 
the  United  States. 

Mr.  SMITH.  What  has  preceded.  Mr.  Lubin,  seems  to  be  in  the  way 
of  preliminary,  of  argument.    What,  then,  is  this  system,  how  does 


it  work,  and  in  what  way  has  it  become  the  bulwark  of  Germany  ? 
Mr.  LUBIN.  Well,  I  will  try  to  give  you  a  detailed  description  ; 


you 
to  appreciate  the  explanation  in  detail  that  I  will  give  further  on. 

Some  50  years  ago  the  commerce  of  this  country  was  carried  on 
about  in  this  manner:  There  were  three  people  to  the  transaction. 
There  was  the  manufacturer,  the  jobber,  and  the  retailer.  Substan- 
tially the  only  man  that  had  access  to  money  that  could  be  dynami- 
cally employed  was  the  jobber.  The  retailer  at  that  time,  could  get 
little  or  no  accommodation  at  the  banks,  and  neither  could  the  manu- 
facturer. 

As  a  result,  it  was  impossible  for  the  retailer  to  do  business  with  the 
manufacturer  direct,  for  the  manufacturer  had  no  money  that  he 
could  use  dynamically.  In  fact  even  in  cases  where  the  retailer  had 
cash  and  desired  to  buy  of  the  manufacturer  he  was  not  permitted  to 
do  so.  He  was  plainly  told  that  to  do  so  would  cause  nim  the  loss 
of  his  business  head,  and,  again,  if  he  went  to  the  manufacturer  he 
was  told  plainly,  "  I  can't  sell  goods  to  you.  Go  to  the  jobber."  Now, 
what  was  the  outcome  of  that  system  ?  This :  That  50  years  ago  we 
had  the  poorest  manufactures  in  the  world,  we  made  shoddy  clothes 
and  paper-soled  shoes,  and  at  the  highest  price  in  all  the  world. 

Toward  the  end  of  the  seventies  a  change  took  place.  Department 
stores  and  mail-order  concerns  jumped  up,  as  it  were,  overnight. 
That  meant  a  boycott  of  the  jobber  and  a  straight  run  of  the  retailer 
direct  to  the  manufacturer,  ail  of  which  resulted  in  war  without  quar- 
ter. In  the  end  the  jobber  went  down,  and  is  down  and  out  to-day. 
What  is  the  result  of  all  this  ?  Labor  is  much  higher,  the  manufac- 
tures of  the  United  States  stand  to-day  as  the  best  in  the  world  and, 
substantially,  at  the  lowest  price  in  the  world.  Now,  what  the  jobber 
was  in  those  days  to  commerce  and  industry,  that  the  trust  in  food 
products  is  to-day  to  the  farmer  and  to  the  consumer. 

I  will  now  take  up  the  details  of  the  Landwirtschaftsrat  and  its 
adaptation  in  the  United  States.  There  is  to  be  a  series  of  organiza- 
tions of  various  degrees,  all  federated  into  one  great  organization 
semiofficial  in  character.  Like  in  a  pyramid,  it  will  consist,  as  it  were, 
of  different  layers.  Beginning  with  the  apex  there  will  be  the 
national  commission;  then  the  wider  layer  below  that,  the  State  com- 
missions; on  the  still  wider  layer  below  that,  the  county  commissions; 
with  the  widest  layer  at  the  base,  the  township  commissions. 

There  is,  first  of  all,  to  be  a  national  commission,  say,  of  15  able 
representative  fanners  and  14  other  men  not  necessarily  farmers,  but 
leading  men.  Let  us  say  that  one  is  an  eminent  carrier,  the  president 
of  a  railway  company;  then,  say,  an  eminent  financier,  a  well-known 
banker;  then,  an  eminent  man  having  r  knowledge  of  interstate- 
commerce  relations,  an  Interstate  Commerce  Commission  man;  then, 
an  ex-Postmaster  General,  say,  with  a  knowledge  of  parcels  post ;  and 
others,  captains  of  industry,  men  who  deal  in  large  matters  of  business. 


PRACTICAL    NATIONAL    MARKETING   ORGANIZATION.  7 

Thus  the  15  farmers  and  these  14  business  men  would  compose  a 
national  commission  of  29. 

This  commission,  say,  with  headquarters  in  Washington,  would 
meet  hi  session  for  a  few  days,  say,  once  or  twice  a  year,  passing 
upon  all  measures  and  by-laws  necessary  to  govern  the  national  organ- 
ization. Under  this  commission  there  is  to  be  a  secretary  general 
with  his  staff,  who  are  to  constitute  the  working  bureau.  This 
bureau  is  to  have  its  headquarters  in  which  to  carry  on  the  work  the 
year  round.  It  is  this  secretary,  with  his  staff  of  assistants,  these 
oureaus,  who  are  to  do  the  work. 

A  similar  commission  to  this  national  commission,  with  its  secre- 
tary and  working  force,  is  to  be  constituted  for  each  State  in  the 
Union;  that  would  be  the  wider  or  second  layer  of  the  pyramid. 

The  third  and  still  wider  layer  is  a  similar  commission  for  each 
county  in  each  of  the  States  of  the  Union.  And,  finally,  the  last  and 
widest  layer  is  a  similar  commission  for  each  of  the  townships  in 
each  of  the  counties  of  the  State  in  the  various  States  of  the  Union. 
The  National,  State,  county,  and  township  organizations,  when  con- 
federated, would  consist  of  several  million  units. 

The  collective  organizations  would  properly  be  designated  the 
"national  marketing  organization."  Such  an  organization  would  be 
to  industry  and  agriculture  what  the  chambers  of  commerce,  boards 
of  trade,  mercantile  agencies,  and  clearance  houses  are  to  commerce 
and  finance.  Remove  all  these  from  commerce  and  finance  and  you 
will  soon  produce  decay,  failure,  and  revolution.  All  these  are  absent 
so  far  as  the  industry  of  agriculture  is  concerned.  The  proposed 
National  marketing  organization  would  supply  them. 

Once  put  the  national  marketing  organization  in  operation  and 
there  will  be  no  need  to  grope  in  the  dark  or  to  guess  where  to  sell 
and  when  to  sell  and  how  to  sell. 

Toward  this  end  the  working  bureaus  oould  bring  into  play  all  the 
modern  means  of  up-to-date  business  facilities.  They  could  employ 
the  telephone,  the  night-letter  telegram,  and  card-indexing  system. 
The  communications  could  be  regulated  to  come  from  the  township 
to  the  county  organization,  from  the  county  organization  to  the 
State  organization,  from  the  State  organization  to  the  national 
organization.  The  national  organization  could  be  in  touch  with  the 
local  markets,  with  the  markets  throughout  the  States,  and  with  the 
market  centers  of  the  world.  Each  producer  would  thus  be  enabled 
to  see,  not  merely  with  his  own  eyes,  as  at  present,  but  with  the  help 
of  four  or  five  millions  of  his  fellow  workers'  eyes.  Where  now  there 
is  commercial  ignorance  and  darkness,  there  would  then  be  commer- 
cial knowledge  and  light.  At  the  present  tune  each  producer's  lack 
of  knowledge  oauses  nun  to  grope  around  in  a  limited  territory  full 
of  cul-de-sacs,  but  under  the  proposed  national  marketing  organiza- 
tion the  farmers  evervwhere  would  have  the  same  light  and  intelli- 
gence in  the  commercial  end  of  agriculture  as  merchants  and  finan- 
ciers have  in  the  business  of  commerce  and  finance. 

Mr.  SMITH.  It  might  be  contended  that  this  system  would  create 
an  organization  so  powerful  as  to  become  a  dangerous  political  factor. 

Mr.  LUBIN.  You  would  be  quite  right  if  the  contemplated  organi- 
zation were  a  Government  institution,  but  this  should  not  be. 

Mr.  SMITH.  You  would  have  the  proposed  organization  to  be  free 
from  any  governmental  action  ? 


8  PRACTICAL  NATIONAL  MARKETING   ORGANIZATION. 

Mr.  LUBIN.  No;  not  that,  either.  If  this  were  a  governmental 
institution  it  would  lead  to  political  centralization,  when,  presently. 
the  Government  would  become  autocratic  to  an  extent  that  wouM 
nullify  its  republican  and  democratic  status.  If,  on  the  other  hum!. 
it  were  absolutely  disconnected  from  any  Government  infliicn« •<-.  it 
would  then  not  be  possible  to  materialize  itself.  There  would  thru  !><> 
nothing  to  prevent  any  number  of  competingorganizations  from 
springing  up  with  like  powers  and  functions.  Were  such  to  be  tho 
case  it  would  soon  neutralize  the  power  and  effectiveness  of  all  these 
organizations,  the  same  as  it  does  now  in  the  United  States  and  as  it 
formerly  did  in  Germany. 

The  chief  merit  of  the  German  system  consists  in  the  fact  that  the 
Landwirtschaftsrat  is  a  semiofficial  organization.  I  wish  to  empha- 
size the  word  "semiofficial."  While  the  German  Landwirtschaftsrat 
exists  under  the  imperial  laws  of  Germany,  and  while  its  operations 
must  conform  to  those  laws,  there  is  no  jurisdiction  between  this 
organization  and  any  cabinet  ministries  of  Germany.  The  Landwirt- 
schaftsrat, while  under  Government  law,  is  not  a  servant  or  adjunct 
of  the  Government.  Apart  from  obeying  the  few  fundamental  and 
simple  by-laws  inscribed  on  its  charter  by  the  Government,  it  is  in 
all  other  respects  autonomous.  In  the  place  of  being  subject  to  a 
department  of  the  Government,  it  is,  on  the  contrary,  a  critic  of  the 
Government;  in  other  words,  it  is  semiofficial. 

Being  composed  of  a  membership  of  millions  of  units,  units  com- 
posed of  all  poli tical  shades,  there  would  then  be  no  danger  of  wielding 
this  organization  as  a  special  political  party  machine,  not  any  more  so 
than  it  would  be  possible  to  politically  utilize  the  members  of  the 
chambers  of  commerce  or  boards  of  trade. 

Mr.  SMITH.  I  do  not  think  you  have  covered  this,  Mr.  Lubin:  For 
what  purpose  would  this  organization  be  established  and  in  what 
way  would  it  benefit  the  farmer  ? 

Mr.  LUBIN.  Let  me  give  you  some  concrete  examples.  Last  fall  I 
had  occasion  to  travel  around  in  a  portion  of  Massachusetts  in  an  auto- 
mobile. On  the  road  I  saw  in  the  fields  heaps  of  apples  on  the  ground. 
I  said  to  the  lady  sitting  next  to  me:  "Let's  stop  and  buy  some  ap- 
ples." The  automobile  stopped  and  the  lady  got  out  and  brought 
back  a  good  lot  of  them.  I  said:  "Where  is  the  man  to  pay  for  the 
apples  r'  She  said  there  was  nothing  to  pay;  that  there  was  no  mar- 
ket for  the  apples;  that  anyone  might  take  them;  that  they  were 
lying  around  on  the  ground  rotting;  that  we  might  take  away  all  the 
apples  we  wished.  Out  in  California,  at  Lodi,  I  had  a  talk  with  the 
owner  of  a  large  vineyard.  He  gave  me  to  understand  that,  so  far 
production  was  concerned,  thanks  to  the  scientific  information  from 
the  Department  of  Agriculture,  there  was  nothing  to  complain  of; 
that  by  skillful  pruning  and  cultivating  he  had  increased  production 
a  ton  to  a  ton  and  a  half  an  acre;  but  when  asked  about  distribution, 
with  regard  to  the  sale  of  his  wine  grapes,  that  was  a  different  story. 
The  wine  grapes  from  which  the  "  V inordinaire "  is  made  are  worth 
about  $30  a  ton  in  Italy,  France,  or  Spain.  They  used  to  be  worth 
from  $30  to  $40  a  ton  in  California,  out  the  organization  of  wine 
makers,  through  combination,  have  brought  the  price  down  to  $25, 
then  to  $20,  then  to  $15,  then  to  $10,  and  just  now  to  $7.50  a  ton. 
Now,  multiply  these  instances  as  they  occur  on  the  farms  of  the 
North,  and  of  the  South,  and  of  the  East,  and  of  the  West,  and  what 


PRACTICAL   NATIONAL   MABKETING   ORGANIZATION.  9 

are  we  doing  ?  We  are  squeezing  out  the  life  and  the  spirit  of  this 
Nation,  the  better  things  that  go  to  make  a  republic,  thatgo  to  make 
a  great  and  mighty  nation.  And  what  else  do  we  do  ?  Why,  we  try- 
to  even  it  up  oy  bombastic  political  speeches,  by  Fourth  of  July 
orations,  by  rhetorical  rhapsodies  on  the  Stars  and  Stripes. 

Were  the  founders  of  the  Republic  here,  the  fathers  of  the  Revolu- 
tion, were  they  to  see  our  conduct  in  this  respect,  they  would  not 
hesitate  to  denominate  this  as  political  hypocrisy.  We  are  simply 
selling  our  birthright  for  a  mess  of  pottage.  Before  we  may  make 
our  country  a  strong  and  enduring  political  entity  we  must  make 
strong  the  conservative  element  in  the  United  States,  the  producer, 
so  that  he  may  be  a  match,  an  equal  match,  in  the  political  tug  of 
war  with  the  city  progressive,  the  consumer,  the  city  radical.  This, 
and  this  alone,  will  make  a  strong  and  enduring  Republic.  If  we  leave 
this  undone,  then  all  the  warships  and  all  the  Navy  and  all  the  Army, 
however  grand  and  strong,  will  not  save  the  Republic.  But  if  we 
balance  equa^y  the  strength  of  the  country  conservative  with  the 
city  progressive  we  make  a  great  Nation,  not  great  in  bombast,  but 
great  in  reality.  That  is  the  secret  of  the  strength  of  Germany. 

Mr.  SMITH.  As  I  understand  it,  then,  the  object  is  to  procure  an 
equitable  distribution  of  agricultural  products  through  well-directed 
intelligence — to  employ  the  best  means  for  the  placing  of  the  surplus 
crops  in  the  localities  where  they  are  needed. 

Mr.  LUBIN.  Yesj  intelligent  and  equitable  distribution. 

Mr.  SMITH.  I  think  I  now  understand  what  you  mean. 

Mr.  LUBIN.  Very  good.  I  will  now  take  up  the  rural  credits 
matter. 

RURAL   CREDITS. 

The  origin  of  the  rural-credits  propaganda  in  the  United  States  can 
be  traced  to  the  labors  of  the  International  Institute  of  Agriculture 
at  Rome.  The  importance  of  rural  credits  is  now  beginning  to  be 
understood,  but  the  difficulty  comes  in  centering  the  mind  on  what 
would  be  likely  to  prove  the  best  system  for  adoption. 

During  the  many  years'  observation  in  the  institute  I  have  come 
to  the  conclusion  that  an  adaptation  of  the  Landschaft  system  would 
be  of  the  most  advantage  to  the  American  farmer. 

Mr.  SMITH.  Will  you  please  explain  what  this  rural  credits  system 
is? 

Mr.  LUBIN.  There  are  several  kinds  of  rural  credits  systems. 
There  is  the  personal  credit  and  the  mortgage  credit.  I  wish  to  limit 
my  remarks  to  mortgage  credit,  to  the  adaptation  of  the  Landschaft. 

The  Landschaft  rural  credits  system  has  been  in  operation  in  Ger- 
many for  151  years.  It  was  proposed  by  a  man  by  the  name  of 
Buring.  It  was  rejected  by  the  Reichstag,  but  it  was  taken  up  by 
Frederick  the  Great  and  adopted.  It  has  been  in  operation  for  151 
years,  with  a  record  that  during  that  tune  there  has  not  been  a  single 
failure. 

From  figures  given  by  the  International  Institute  of  Agriculture  I 
find  that  the  Landschaften  of  Germany  have  outstanding  420,000,000 
marks  in  3  per  cent  bonds,  2,000,000,000  marks  in  3£  per  cent  bonds, 
and  500,000,000  marks  in  4  per  cent  bonds.  (A  mark  is  25  cents.) 

Mr.  SMITH.  How  is  the  Landschaft  formed  and  how  does  it  operate  ? 


10  PRACTICAL   NATIONAL   MARKETING   ORGANIZATION. 

Mr.  LUBIN.  The  Landschaft  is  formed  under  tin-  I'ru.-Man  law 
much  the  same  as  a  national  bank  is  formed  in  the  United  Si 
A  group  of  landowners  ask  for  a  charter  to  form  a  Landschaft. 
Now,  supposing  the  collective  value  of  the  farming  land  in  this 
Landschaft  to  oe  worth  $5,000.000,  if  there  is  a  bond  of  $1,000 
floating  in  the  open  market  of  tnis  Landschaft  what  is  the  security 
of  this  $1,000  b9nd?  The  security  is  the  $5,000,000  value  of  the 
Landschaft.  This  being  the  case,  it  becomes  the  reason  why  the 
Landschaft  bond  sells  in  the  open  market  at  about  the  same  rate  as 
a  Government  bond.  In  fact,  it  has  a  merit  far  above  a  Government 
bond.  A  couple  of  months  ago  I  wrote  on  to  Prof.  Brodnitz,  of  the 
Halle  University,  who  is  in  a  position  to  make  an  authoritative  state- 
ment on  the  subject.  I  asked  him  the  question:  "How  about  the 
Landschaft  bonds  ?  How  are  they  standing  during  the  present  war  ? 
Are  i 1  ey  holding  their  own  or  have  they  fallen  like  other  securities  ?" 
And  he  replied:  "They  are  holding  their  own  as  they  did  in  panics 
and  wars  before  now.  The  Bourse,  as  you  know,  is  at  present  closed, 
but  the  Landschaft  bonds  in  passing  from  hand  to  hand  maintain 
their  values  as  before  the  war." 

Mr.  SMITH.  How  does  the  farmer  get  hold  of  one  of  these  bonds  ? 

Mr.  LUBIN.  The  farmer  gets  them  from  his  own  Landschaft,  from 
his  board  of  directors. 

Mr.  SMITH.  What  security  does  he  give  ? 

Mr.  LUBIN.  The  mortgage  on  his  land. 

Mr.  SMITH.  That  seems  to  be  a  simple  thing.  Could  we  do  the 
same  thing  here  ? 

Mr.  LUBIN.  Yes,  we  could;  but  something  has  to  be  done  before 
we  can  do  what  the  German  farmer  can  do  under  the  Landschaft. 
Unless  we  can  do  that  "something"  the  bond  would  not  float.  It 
would  fall  flat  to  the  ground.  It  would  prove  of  no  value  whatever. 

Mr.  SMITH.  What  is  that  "something?  ' 

Mr.  LUBIN.  That  "something"  really  consists  of  two  "some- 
things." The  first  relates  to  the  tenure  of  land.  Under  the  Land- 
schaft there  can  be  no  question  raised  as  to  title.  A  mortgage  on  a 
piece  of  land  within  that  Landschaft  is  in  fact  equivalent  to  a  judg- 
ment, and  foreclosures  may  be  effected  by  the  Landschaft  without 
any  further  recourse  to  lawsuit. 

And  then  there  is  no  doubt  as  to  the  correct  valuation  of  the  land 
and  for  processes  to  maintain  its  profit-earning  value. 

Mr.  SMITH.  That  would  be  a  matter  requiring  special  laws,  not  only 
by  the  United  States  but  also  by  the  States. 

Mr.  LUBIN.  Certainly.  There  would  have  to  be  laws  governing 
the  question  of  titles  and  the  waiver  of  foreclosure  suits.  And  then, 
as  to  valuation,  that  has  to  be  provided  for.  It  has  to  be  determined 
what  is  the  depth  of  the  soil,  whether  it  is  subject  to  overflow  or 
atmospheric  troubles,  what  it  produces,  what  its  net  earning  power 
is,  and  there  must  be  a  method  for  the  maintenance  of  that  earning 
power  during  the  life  of  the  mortgage. 

These  things  must  be  settled;  settled  to  the  satisfaction  of  the 
Government;  settled  to  the  satisfaction  of  the  borrower;  settled  to  the 
satisfaction  of  the  expert ;  and  settled  to  the  satisfaction  of  the  novice. 
And  there  will  be  no  trouble  to  sell  the  bonds  in  the  open  market  at 
the  same  rate  as  Government  bonds. 


PRACTICAL   NATIONAL   MARKETING   ORGANIZATION.  11 

In  fact,  they  will  be  better  than  Government  bonds,  for  Govern- 
ment bonds  fall  during  political  troubles  or  wars,  but  Landschaft 
bonds  of  the  character  aoove  set  forth  maintain  then*  value  for  a 
50-year  or  75-year  term,  as  they  do  hi  Germany. 

Mr.  SMITH.  This  bond,  then,  is  really  a  mortgage  given  by  the  bor- 
rower to  the  bank? 

Mr.  LUBIN.  There  is  no  bank.  The  Landschaft  does  not  require  a 
bank.  There  is  simply  an  organization  of  borrowers,  an  organization 
of  farmers  who  borrow,  an  organization  called  the  Landschaft,  with 
its  board  of  directors,  and  the  public  bourse  or  exchange,  and  that  is 
all.  The  bonds  are  sold  the  same  as  shares  of  stock  of  the  United 
States  Steel  Corporation,  the  copper  corporation,  shares  of  Erie,  or 
Lake  Shore,  or  Pennsylvania  Railways. 

Mr.  SMITH.  The  farmer  who  borrows  pays  interest,  does  he  not  ? 

Mr.  LUBIN.  Yes;  certainly  he  does. 

Mr.  SMITH.  What  advantage  over  the  present  system  would  it  be 
to  the  farmer  who  borrowed  from  this  organization  ?  Is  the  interest 
less? 

Mr.  LUBIN.  It  is  decidedly  less.  In  Germany  it  is  3,  3£,  or  4  per 
cent.  The  farmer  has  the  choice  of  either  one  of  the  three  rates  of 
interest  with  amortization.  The  bonds  run  from  50  to  75  years.  The 
mortgage  may  run  all  that  time,  but  it  may  be  canceled  at  any 
moment  by  the  farmer  buying  the  bonds  in  the  open  market.  He 
may  then  bring  them  to  the  Landschaft  directors,  when  he  can 
receive  back  his  mortgage  on  the  land  on  demand. 

Mr.  SMITH.  Am  I  to  understand  that  when  a  farmer  goes  to  the 
Landschaft  to  borrow  that  he  is  given  a  bond  rather  than  money, 
and  that  he  negotiates  this  bond  in  the  open  market  ? 

Mr.  LUBIN.  Yes;  because  the  Landschaft  has  no  money.  It  is  no 
bank.  There  is  simply  a  board  of  directors. 

Mr.  SMITH.  Say  he  goes  to  borrow  $1,000  from  the  Landschaft  at  3 
per  cent  interest.  He  is  given  a  bond  which  he  negotiates  in  the 
open  market  at  92.  Does  he  not  obtain  his  money  at  a  discount  and 
pay  interest  on  the  face  value  of  the  bond?  What  would  be  the 
advantage  to  a  man  to  borrow  from  this  organization  at  less  than  par 
when  he  could  go  to  an  outsider  and  get  the  full  amount  of  his  note 
at  the  same  rate  of  interest  ? 

Mr.  LUBIN.  That  would  all  depend  upon  a  question  of  land  tenure, 
and  a  question  of  the  character  of  the  valuation.  Your  question  is 
tentatively  correct  but  hardly  coincides  with  the  facts  as  they  are. 
In  the  first  place,  there  is  not  a  farmer  anywhere  in  the  world  that 
can  get  money  on  an  ordinary  farm  mortgage  at  3  per  cent  or  4  per 
cent  nor  for  5  per  cent,  and  very  rarely  for  6  per  cent.  Normally 
the  rate  is  from  8  per  cent  to  12  per  cent,  and  sometimes  higher  than 
that  when  the  cost  of  record  searching,  legal  requirements,  commis- 
sions, and  other  incidentals  are  considered.  The  few  cases  in  the 
United  States  where  mortgage  loans  on  farms  can  be  had  for  less  than 
7  per  cent  are  cases  where  there  are  special  reasons  for  it — the  bor- 
rower has  considerable  wealth  outside  of  the  piece  of  land  he  may 
mortgage.  In  other  words,  he  is  considered  "good"  independent  of 
the  mortgage.  Even  then  he  may  only  obtain  a  loan  for  a  few 
years,  and  he  must  go  to  the  expense  and  trouble  from  time  to  time 
to  renew. 


12  PRACTICAL   NATIONAL   MARKETING    ORGANIZATION. 

In  a  hearing  on  the  Hollis-Bulkley  bill  one  of  die  malingers  of  the 
Prudential  Life  Insurance  Co.  testified  that  his  company  had  I 
sums  of  money  out  for  which  they  received  something  over  5  per  rent . 
That  seems  low  enough,  but  on  cross-questioning  this  witness  it  was 
found  that  there  was  a  middleman  between  the  Prudential  Co.  and 
the  fanner.  The  Prudential  received  this  low  rate  from  the  middle- 
man, but  the  fanner  paid  his  8,  or  8£,  or  9,  or  10  per  cent,  as  the  case 
might  be.  The  middleman,  in  fact,  served  as  a  sort  of  Landschaft 
for  his  own  benefit. 

Let  it  be  understood  once  for  all  that  the  farmer  at  present  can  not 
have  a  mortgage  loan  in  the  United  States  from  50  to  75  years  at  any 
rate  of  interest,  nor  can  he  get  any  money  on  a  mortgage  of  his  farm 
at  any  such  rate  as  3,  3£,  or  4  per  cent  with  or  without  amortization. 
He  would  find  it  a  hard  job  to  get  it  to-day  at  double  that  amount. 
He  would  find  it  no  hardship  to  get  it  at  all  at  3,  3 £,  or  4  per  cent,  as 
he  would  elect,  under  the  Landschaft,  provided,  of  course,  that  the 
Landschaft  is  properly  constituted,  as  in  Germany.  And  then  take 
the  matter  of  cancellation,  if  he  takes  out  a  mortgage  to-day  for  10 
years  he  can  not  cancel  that  mortgage  until  the  10  years  are  up. 
Under  the  Landschaft,  even  if  the  oond  reads  for  75  years,  he  can 
cancel  it  a  day  or  two  after  he  has  mortgaged  his  land.  All  he  needs 
to  do  is  to  buy  the  bonds  back  in  the  open  market,  bring  them  to  the 
directors,  and  he  receives  his  mortgage  back  on  demand,  and  is  free 
from  debt  right  then  and  there. 

Now,  as  for  the  selling  of  the  bond  at  92  in  the  open  market,  if  he 
sells  it  for  92  he  can  in  all  likelihood  buy  it  back  for  92.  If  his  Land- 
schaft stands  high,  it  will  sell  for  above  par  and  not  at  92. 

It  is  the  Landschaft  that  can  do  all  that,  provided  the  underlying 
laws  of  the  Landschaft  are  made  to  apply  here  as  in  Germany. 

It  would  be  well  to  understand  first  of  all  that  we  should  carefully 
avoid  adopting  some  plan  simply  because  of  some  inspiration  that 
may  find  its  way  into  the  heads  of  those  who  are  looking  for  inspira- 
tions in  the  financial  line.  A  plan  may  seem  to  be  logical,  may  seem 
to  be  plausibly  put,  a  plan  may  even  be  eloquently  advocated,  but 
which  might  in  the  end  prove  to  be  a  serious  loss  to  borrower  and 
lender.  It  is  no  more  practical  to  play  finance  from  a  written  plan 
than  it  would  be  to  produce  symphony  music  by  handing  a  novice  a 
violin  and  a  written  symphony  and  expect  him  to  play.  In  matters 
of  finance,  especially  so  in  a  case  where  speculation  is  almost  entirely 
eliminated,  it  is  the  safest  course  to  go  down  to  the  bedrock  of 
experience. 

We  have  had  experience  in  the  case  of  the  Landschaft.  It  has 
operated  for  151  years.  It  is  operating  now  during  this  great  war  in 
Europe.  And  during  these  151  years  there  has  not  been  a  single 
failure  and  the  Landschaft  bonds  have  maintained  their  value. 

Mr.  SMITH.  I  wish  to  ask,  Mr.  Lubin,  does  the  German  Government 
have  generai  supervision  over  the  Landschaft  system  ? 

Mr.  LUBIN.  Yes. 

Mr.  SMITH.  If  adopted  in  the  United  States  the  United  States 
Government  would  then  have  general  supervision  ? 

Mr.  LUBIN.  Supervision,  yes;  but  no  guarantee,  nor  would  the 
Government  be  called  upon  to  buy  any  01  the  bonds. 

Mr.  SMITH.  Who  gets  the  benefit  of  this  system  ? 

Mr.  LUBIN.  The  farmers  who  are  members  of  the  Landschaft,  but 
this  is  by  no  means  all,  for  the  public,  the  lenders,  are  also  benefited. 


PRACTICAL   NATIONAL   MARKETING   ORGANIZATION.  13 

Under  the  laws  of  Germany  the  Landschaft  bonds  are  considered 
so  safe  that  the  German  Government  directs  that  the  trust  funds  of 
widows  and  orphans  must  be  invested  in  these  Landschaft  bonds. 
Then  there  are  a  great  many  merchants  and  others  who  may  have  a 
surplus  which  they  would  very  much  like  to  invest  in  bonds  that  are 
as  mobile  and  as  safe  as  the  Landschaft  bonds  are  and  as  easily  con- 
vertible into  cash. 

Where  is  the  avenue  at  the  present  time  for  the  investment  of 
widows'  and  orphans'  funds  in  the  United  States?  Where  is  the 
opportunity  for  investments  to  run  from  50  to  75  years  that  would  be 
as  safe  as  the  Landschaft  bonds  are  in  Germany  ?  Then,  again,  there 
are  the  great  life  insurance  companies  who  have  hundreds  of  mil- 
lions of  dollars  to  invest  in  farm  mortgages.  Would  they  not  be 
better  off  to  invest  their  money  in  Landschaft  bonds  if  we  could  have 
them  in  the  United  States  of  as  safe  a  character  as  they  are  in 
Germany. 

In  other  words,  what  the  ordinary  money  lender  does  on  a  small 
retail  scale  of  searching  records,  of  diving  down  into  the  real  value 
of  a  piece  of  land,  is  all  done,  as  it  were,  at  wholesale  under  the  Land- 
schait  system.  So  long  as  the  money  lender  does  all  this  in  detail  he 
alone  knows  the  character  of  the  risk.  This  knowledge  is  his  monopoly 
and  he  charges  for  it  accordingly. 

Mr.  SMITH.  As  a  matter  of  fact,  the  Landschaft  becomes  a  finan- 
cial institution  from  which  some  people  derive  profit  ? 

Mr.  LUBIN.  No;  the  Landschaft  is  not  a  financial  institution.  It 
is  simply  an  agent  between  borrower  and  lender.  The  Landschaft 
is  not  a  bank.  It  never  has  any  money,  excepting  it  be  a  few  dollars 
for  paying  rent  of  a  room  or  to  buy  a  tew  office  chairs,  a  desk,  or  a 
safe.  Otherwise  it  has  no  money. 

Mr.  SMITH.  I  understand  that  there  are  bonds,  and  that  these 
bonds  draw  3  per  cent  interest  ? 

Mr.  LUBIN.  Yes.  The  Landschaft  issues  these  bonds,  gives  them 
to  the  borrower  in  exchange  for  his  mortgage.  The  Landschaft 
collects  from  the  borrower  the  3  per  cent  interest  on  that  bond  and 
immediately  pays  it  over  to  the  holder  of  the  bond. 

Mr.  SMITH.  I  do  not  see  where  they  get  the  3  per  cent  from  to  pay. 

Mr.  LUBIN.  They  get  it  from  Johnson  and  Thompson,  from  the 
farmers,  the  members  of  the  Landschaft  who  have  deposited  then* 
mortgages  and  received  their  bonds  and  sold  them. 

Mr.  SMITH.  Then  the  Landschaft  becomes  a  financial  institution 
for  gain  ? 

Mr.  LUBIN.  No.  The  Landschaft  is  not  a  financial  institution  for 
gain.  The  Landschaft  merely  acts  as  a  medium  or  agent  between 
the  borrower  and  lender  for  the  collection  of  the  interest  from  the 
borrowers  and  the  distribution  of  it  among  the  holders  of  the  bonds. 

Mr.  SMITH.  If  such  a  system  were  established  in  the  United  States, 
to  what  extent  would  the  financial  institutions  here  be  opposed  to  it  ? 
Who  would  benefit  by  the  3  per  cent  interest  ? 

Mr.  LUBIN.  As  for  the  first  question,  I  can  understand  that  there 
are  a  certain  number  of  farm-mortgage  money  lenders  who  are  at 
present  receiving  high  interest  rates  who  would  be  likely  to  oppose 
the  Landschaft. 

In  contradistinction  to  these  there  are  the  great  railroad  corpora- 
tions who  may  quite  likely  favor  the  Landschaft,  for  the  railroads  are 


14  PRACTICAL   NATIONAL   MARKETING    ORGANIZATION. 

beginning  to  understand  that  the  values  of  their  roads  are  determine! 
by  the  economic  status  of  the  farmers  on  both  sides  of  their  railroad 
track.  Then  there  are  the  great  capitalists  of  the  country,  those  wlm 
have  a  fortune  already  amassed.  These  would  be  inclined  to  favor 
the  Landschaf  t  because  any  system  or  condition  that  would  work  for 
the  economic  welfare  of  trie  farmers  of  this  country  would  at  the 
same  time  stabilize  their  values  and  securities. 

I  think  hi  answering  the  first  of  your  questions  I  have  answered  the 
second.  Let  me  repeat  it:  Who  will  benefit  by  the  3  per  cent  inter- 
est? The  whole  country  will  benefit  by  it,  the  farmers,  the  widows 
and  orphans'  trust  funds,  the  railroad  companies,  the  great  financial 
concerns,  the  capitalists,  and,  necessarily,  though  indirectly,  the 
workingmen  of  the  United  States,  for  you  can  not  improve  the  con- 
dition of  the  farmers  throughout  the  country  without  bettering  and 
advancing  the  wage  rate. 

Mr.  SMITH.  Is  it  not  possible  for  us  to  start  other  kinds  of  rural- 
credits  systems  that  wiD  do  the  same  thing  as  it  is  proposed  to  do 
under  the  Landschaf  t  and  without  any  such  changes  in  the  law?  If 
so,  why  should  we  make  such  changes  in  the  land  laws  and  in  the 
land  titles  when  we  can  do  the  same  thing  in  another  way?  What 
is  the  matter  with  those  other  proposals  ? 

Mr.  LUBIN.  I  am  rather  glad  that  you  asked  that  question.  I  wish 
to  say  the  same  question  has  been  asked  by  many  other  inquirers. 
The  answer  is  this:  There  are  other  systems,  such  as,  for  instance, 
personal  credit,  not  on  land  mortgages.  These  personal  rural-credits 
systems  are  not  under  our  consideration  now.  The  matter  before  us 
is  solely  confined  to  the  subject  of  farm-land  mortgage  credit;  and 
when  we  confine  the  matter  to  this  alone  we  will  find  the  Landschait 
to  be  by  far  the  best  and  safest  rural-credit  system  of  any  in  the  world. 

It  should  be  understood  that  interest  on  money  borrowed  on  a 
farm  mortgage  must,  under  present  conditions,  necessarily  be  high, 
for  the  money  lender,  say,  has  paid  out  $5,000  on  a  mortgage,  and  he 
deposits  the  mortgage  in  his  safe,  and  that's  the  end  of  his  $5,000 
until  the  mortgage  is  redeemed;  but,  in  the  case  of  converting  the 
mortgage  into  a  pond,  this  same  $5,000  handed  over  to  the  farmer 
is  reproduced  again  by  the  sale  of  the  bond.  If  private  banks  could 
do  business  of  that  kind,  they  could,  with  a  very  nominal  amount  of 
money,  do  an  enormous  business.  They  could  lend  out  the  same 
$5,000,  receive  their  mortgage,  convert  it  into  a  bond,  get  back  the 
$5,000,  lend  it  on  another  piece  of  property,  receive  a  mortgage,  .con- 
vert it  into  a  bond,  and  they  have  got  their  $5,000  back  again  ready 
for  another  loan. 

They  could  do  this  indefinitely,  if  it  were  safe,  but  it  is  not  safe. 
It  is  dangerous,  dangerous  to  all  concerned.  As  was  pointed  out 
under  our  present  laws  each  State,  each  county,  each  township,  and 
each  tract  of  land  is,  as  it  were,  a  law  to  itself,  the  bearing  and  sig- 
nificance of  which  would  have  to  be  taken  on  the  faith  of  statements 
in  a  ''prospectus"  or  the  representation  of  the  bank.  The  bank,  in 
turn,  would  have  to  take  their  information  from  their  agents.  The 
public  would  then  have  to  have  faith  that  all  was  right  and  that  all 
would  continue  to  be  right. 

It  can  be  safely  predicted  that  a  bond  of  that  character  would  not 
be  brought  by  such  a  concern  as  J.  P.  Morgan  &  Co.,  Kuhn,  Loeb  & 
Co.,  or  the  New  York  Life  Insurance  Co.  None  of  these  concerns 


PRACTICAL   NATIONAL   MARKETING   ORGANIZATION.  15 

would  buy  a  bond  of  that  kind  for  10  cents  on  the  dollar,  certainly 
not  on  long  time,  at  97,  and  at  3|  per  cent  interest.  But  it  is  safe 
to  predict  that  the  same  concerns  would  buy  a  Landschaft  bond  if 
they  were  as  safely  devised  in  the  United  States  as  in  Germany. 
They  would  then  buy  them  as  freely  as  they  would  Government 
bonds. 

That  all  this  is  more  or  less  vividly  present  in  the  minds  of  those 
with  rural  credit  bills  in  Congress  wno  ask  that  the  bonds  be  guar- 
anteed or  purchased  by  the  Government  is  evident.  It  must  seem 
obvious  that  any  such  propositions,  propositions  whereby  the  Gov- 
ernment must  guarantee  the  bonds,  or  must  buy  them,  should  be 
looked  upon  with  suspicion.  If  the  bond  is  good,  it  will  float  and 
keep  floating  without  Government  aid.  If  it  can  not  float  of  its  own 
accord,  it  ought  not  to  be  made  to  float  with  Government  aid.  Gov- 
ernment aid  applied  to  a  bond  that  will  not  float  on  its  own  merits 
is  doomed  to  fall,  is  doomed  to  cause  disaster  and  loss. 

And  if  we  are  to  have  bonds  of  a  character  to  float  without  Govern- 
ment guarantee  or  Government  purchase,  then  we  would  have  to 
have  the  same  legislation  that  would  be  required  for  the  Landschaft 
system. 

And  if  we  are  to  change  the  laws  at  all,  why  should  it  be  done  for  a 
system  of  banks  when  farmers  know  nothing  about  running  banks? 
But,  say  these  others,  the  farmers  need  not  run  the  banks;  the  banks 
can  be  run  by  bankers.  Well,  and  what  would  we  then  have  ?  We 
would  have  a  rural-credits  system  run  by  bankers,  whereas  the 
Landsohaft  is  a  rural-credits  system  run  by  the  farmers.  In  the  one 
case  we  have  the  money  lenders  united  in  the  bank — the  united 
money  lenders — but  in  the  Landschaft  we  have  the  united  farmers, 
the  cooperation  of  borrowers,  with  the  public  at  large  as  the  lender. 
This  would  make  available  to  the  farmers  the  widows'  and  orphans' 
funds,  the  surplus  cash  of  the  merchant,  the  savings  of  the  working 
people,  the  millions  of  the  life  insurance  companies,  the  reserve  of 
the  capitalists,  anyone,  the  public.  All  these  compose  the  primary 
source  for  money  everywhere  the  world  over.  It  is  from  this  source 
that  money  can  be  had  at  from  3,  3£,  and  4  per  cent.  Yes,  and  at  2 
per  cent,  as  witness  the  postal  savings  banks.  But  does  anyone 
believe  that  this  money  can  be  had  at  3,  3£,  and  4  per  cent  on  bonds 
of  a  doubtful  value  ?  It  certainly  can  not.  Even  if  it  could,  would 
it  not  be  criminal  to  permit  it  ?  Widows'  and  orphans'  funds  should 
be  considered  a  sacred  trust  and  guarded  securely  against  fraud 
or  loss. 

A  sound  Landschaft,  a  Landschaft  no  less  sound  than  in  Germany, 
would  provide  a  safe  investment,  and  thus  not  alone  procure  the 
farmer  money  on  long  terms  at  the  lowest  rate  of  interest  in  the 
world,  but  at  the  same  time  provide  a  safe  investment  for  widows' 
and  orphans'  funds. 

But  why  lay  such  stress  upon  widows'  and  orphans'  funds? 
Because  it  is  deserving  of  it.  Here  in  this  Nation  of,  say,  100,000,000 
are  the  millions  of  husbands  working  early  and  late,  working  with  all 
their  might.  Why?  To  "lay  by"  something  for  wife  and  children. 
Very  good.  Now,  what  becomes  of  the  "lay  oy"  ?  Well,  it  goes  to 
the  widow  and  orphan.  Supposing  the  same  foots  up  to  $1,000, 
$5,000,  or  $50,000.  What  is  the  widow  to  do  with  it?  Invest  it? 
How?  When?  Where?  Here,  for  instance,  is  a  woman  who  is 


16  PRACTICAL   NATIONAL   MARKETING    OKUAN1ZAT1<  • 

hardly  able  to  manage  her  account  in  the  grocery  store,  who 

never  before  invested  a  dollar,  is  asked  on  the  spur  of  tne  moment  to 

invest  the  savings  of  a  lifetime. 

If  the  Landschaft  could  be  rendered  as  safe  in  the  United  States  as 
it  is  in  Germany,  it  would  provide  the  safest  investment  in  the  world 
for  the  widows'  and  orphans'  funds,  as  well  as  provide  the  American 
farmer  with  long-time  loans  at  3,  34,  and  4  per  cent,  with  amort  i/at  ion. 

There  are,  so  far  as  I  am  aware,  but  three  objections  offered  against 
the  Landschaf  t.  These  are: 

First.  It  has  a  foreign  name;  that  we  need  not  go  to  foreigners 
when  we  can  think  out  a  plan  by  ourselves.  This  objection  is,  of 
course,  foolish. 

Second.  That  the  conditions  governing  financial  transactions  are 
different  in  Germany  from  what  they  are  nere.  This  is  absurd.  We 
may  just  as  well  assert  that  the  law  of  gravitation  works  differently 
there  than  it  does  here. 

Third.  But  right  here  comes  another  objector  who  cries:  "This 
proposal  is  nonsensical.  It  could  never  be  put  into  practical  opera- 
tion. Take,  for  instance,  the  required  National  and  State  legislation 
to  make  it  operative;  would  it  be  possible  to  coerce  each  State  in 
the  Union  to  change  its  laws?" 

In  the  first  place,  if  we  are  to  have  a  bond  that  will  float  and  be 
"good"  and  remain  "good,"  whether  on  the  Landschaft  or  whether 
on  the  mortgage  bank  plan,  we  may  only  have  it  by  changes  in  the  law. 
And,  in  the  second  place,  there  is  no  need  to  coerce  at  all.  Let  Con- 
gress pass  the  law,  providing  in  the  by-laws  of  its  charters  what 
must  or  must  not  be  done.  Let  it  offer  these  charters  to  such  States 
whose  laws  enable  them  to  comply.  The  States  who  will  desire  them 
will  find  ways  how  to  comply. 

I  suspect  that  much  of  the  opposition  comes  from  the  camp  of  the 
interested  mortgage  credit  money  lenders.  To  get  at  the  facts  in  the 
case,  to  leave  no  room  for  doubt,  I  would  suggest  that  there  be  held, 
under  the  auspices  of  the  Government,  a  public  debate  when  farmers 
and  financiers,  after  going  over  the  matter,  could  then  bring  in  their 
report  upon  the  merits  of  the  case. 

Air.  SMITH.  There  is  one  thing,  Mr.  Lubin,  that  is  not  clear  to  me. 
There  must  be  some  expense  attached  to  the  issuing  of  these  Land- 
schaft bonds  and  to  the  auditing  and  liquidation  of  the  same.  How 
are  these  expenses  met  ? 

Mr.  LUBIN.  The  expense  is  quite  nominal  and  is  provided  by  the 
Landschaft. 

Mr.  SMITH.  I  have  listened  to  your  statements,  Mr.  Lubin,  with 
interest,  and  I  shall  take  pleasure  in  submitting  them. 

o 


